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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 0-23489
ACCESS WORLDWIDE COMMUNICATIONS, INC.
_______________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 52-1309227
__________________________________ _________________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
2200 Clarendon Blvd., 12th Floor
Arlington, Virginia 22201
__________________________________ _________________________________________
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (800) 437-5200
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class. Name of Each Exchange on Which
- ------------- Registered.
None. None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
Title of Class
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period as the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference
to the price at which the stock was sold, or the average bid and asked prices
of such stock, as of a specified date within 60 days prior to the date of the
filing.
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 15, 1999 was approximately $44,263,873.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
The number of shares outstanding of the registrant's Common Stock, $.01 par
value, as of March 15, 1999 was 9,027,730 shares.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the documents, all or portions of which are incorporated by
reference herein, and the Part of the Form 10-K into which the document is
incorporated:
Part III incorporates information by reference from the Registrant's Proxy
Statement to be filed with respect to the 1999 Annual Meeting of Stockholders
scheduled to be held on or about April 27, 1999.
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TABLE OF CONTENTS
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Part I
1. Business............................................................. 1
2. Properties........................................................... 9
3. Legal Proceedings.................................................... 9
4. Submission of Matters to a Vote of Security Holders.................. 9
Part II
5. Market for Registrant's Common Equity and Related Shareholder
Matters.................................................................. 10
6. Selected Financial Data.............................................. 11
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................... 12
7A. Quantitative and Qualitative Disclosures about Market Risk............ 18
8. Financial Statements and Supplementary Data.......................... 18
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure..................................................... 41
Part III
10. Directors and Executive Officers of the Registrant................... 41
11. Executive Compensation............................................... 41
12. Security Ownership of Certain Beneficial Owners and Management....... 41
13. Certain Relationships and Related Transactions....................... 41
Part IV
14. Exhibits, Financial Statement Schedules and Reports on Form 10-K...... 41
Signatures.............................................................. 43
Index to Exhibits....................................................... 45
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PART I
Item 1. Business
General
Access Worldwide Communications, Inc. ("Access Worldwide" or the "Company")
is a leading provider of outsourced sales, marketing and medical education
services to Fortune 500 companies in the pharmaceutical, telecommunications,
financial services and consumer products industries. The Company offers a
broad, integrated array of targeted sales, marketing and customer support
services designed to achieve an attractive return on investment ("ROI") for
its clients. In the sales and marketing area, these services include market
research, database management, direct marketing programs, tele-detailing and
tele-sales, sample fulfillment and sales force automation. In the medical
education area, the Company provides comprehensive medical education services
including scientific symposia, medical meetings management and patient
education program development. Leveraging its portfolio of capabilities, the
Company, on behalf of its clients, has a proven record of accessing and
influencing high-value and hard-to-reach audiences including physicians,
pharmacists, and patients in the healthcare arena and multicultural consumers
("Hispanic, Asian and African-American"). The Company believes that it is a
leader in developing multicultural marketing programs that target the
approximately 30% of the U.S. population represented by minorities.
Founded in 1983, the Company has many long-standing customer relationships
with the world's largest pharmaceutical companies and an extensive blue-chip
customer list that includes large and mid-sized pharmaceutical companies,
biotechnology companies, specialty and generic pharmaceutical companies,
medical devices companies and retail pharmacists. The Company's pharmaceutical
customers include Astra Pharmaceuticals, Knoll Pharmaceuticals Inc., Johnson &
Johnson, Novartis Pharmaceutical Corp., Parke-Davis SPA, Pfizer Inc., Procter
& Gamble Co., Roche Pharmaceutical Division of Roche Holding Ltd. and
Schering-Plough Corp. Through its consumer capabilities and multicultural
expertise, the Company also provides services to Fortune 500
telecommunications, financial services and consumer goods companies, of which
Sprint Corp. ("Sprint") is its largest customer.
The Company provides clients with innovative marketing programs, systems and
technologies that help generate incremental sales, market share and profit
growth. These programs are designed to target the Pharmaceutical Marketing
Services Segment ("Pharmaceutical") as well as the Consumer and Business
Services Segment ("Consumer"). For financial information about the Company's
segment reporting, see Note 18 to the Company's Financial Statements.
Forward-looking Statements
This report contains forward-looking statements (within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended), representing
the Company's current expectations and beliefs concerning future events. When
used in this report, the words "believes," "estimates," "plans," "expects,"
"intends," "anticipates," and similar expressions as they relate to the
Company or its management are intended to identify forward-looking statements.
The actual results of the Company could differ materially from those indicated
by the forward-looking statements because of various risks and uncertainties
related to and including, without limitation, the Company's effective and
timely initiation and development of new client relationships and programs,
the maintenance of existing client relationships and programs (particularly
since the Company's agreements with its clients generally do not assure the
Company that it will generate a specific level of revenue, do not designate
the Company as the exclusive service provider and are terminable on short
notice), the successful marketing of the Company's sales, marketing and
medical education services, the achievement of satisfactory levels of both
gross and operating margins, the recruitment and retention of qualified
personnel, the continued enhancement of telecommunications, computer and
information technologies and operational and financial systems, the
achievement by the Company and its suppliers and customers of Year 2000
compliance in a timely and cost efficient manner, the continued and
anticipated growth in industry trends towards outsourcing sales, marketing and
medical education services, changes in competition and the forms of direct
sales and marketing techniques, customer interest in, and use of, the
Company's clients' products and services, general
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economic conditions, costs of telephone services, financing and leasing of
equipment, the adequacy of cash flows from operations and available financings
to fund capital needs and future growth, changes in governmental rules and
regulations applicable to the Company, and other risks set forth in this
report and in the Company's other filings with the Securities and Exchange
Commission. These risks and uncertainties are beyond the ability of the
Company to control, in many cases, the Company cannot predict the risks and
uncertainties that could cause actual results to differ materially from those
indicated by the forward-looking statements.
Pharmaceutical Marketing Services Segment
The Company's broad scope of services and capabilities enables it to
influence physicians, inform pharmacists, involve patients and impact sales.
Specific services are described below:
.Market Research and Database Management. Access Worldwide specializes in
collecting physician and pharmacy data to help its clients better target their
marketing efforts. This data includes physician office information, optimal
sales call times and locations, frequency of procedures performed and pharmacy
personnel. Its data collection and reporting capabilities enhance customers'
productivity.
Access Worldwide is one of a limited number of companies that has a long-
term licensing agreement to access the American Medical Association ("AMA")
master database of 840,000 physicians in the United States. Access Worldwide
provides enhanced database management services to pharmaceutical companies
using its licensed AMA data, along with its proprietary files, state license
files, and Drug Enforcement Administration ("DEA") files. This Medical
Professional Library houses over seven million records, and is used to improve
the performance of pharmaceutical sales force operations.
The Company believes that it has the most comprehensive and accurate
pharmacy database in the United States, comprising 24,000 independent
pharmacists. With this data, Access Worldwide can deliver essential access to
those often uncovered pharmacies that fill approximately 30% of retail
prescriptions in the United States.
.Physician and Pharmacy Direct Marketing. Access Worldwide has exclusive
rights to market and distribute National Football League-branded and
Professional Golf Association Tour-branded single source, direct marketing
publications to healthcare and insurance audiences. The Company's
pharmaceutical clients use these single source publications for targeted
marketing messages to their customers.
The second component of the Company's direct marketing business is its
personalized physician mail programs, used by pharmaceutical sales forces as a
follow-up to physician sales calls. These high-volume letter programs involve
detailed messages to the physician about precise product indications. The
Company mailed in excess of 400,000 letters on behalf of pharmaceutical sales
representatives in the last 12 months.
.Physician and Pharmacy Tele-detailing. The Company communicates with an
average of 15,000 physicians and 24,000 pharmacists every week with targeted
physician and pharmacy telemarketing and direct marketing, vacant territory
management and remote physician coverage programs that influence target
physician prescribing habits and increase market share. This capability is
essential to pharmaceutical companies who are increasingly compelled to
dedicate their field force coverage to a narrower group of blockbuster drugs.
In addition, Access Worldwide plays a critical role in detailing pharmacists
on new products and new indications for existing products. The Company's tele-
driven pharmacy programs reach non-warehousing chain pharmacies, as well as
regional chains, hospitals, nursing home providers and independent retail
pharmacies. Key program components include professional product detailing
presentations, clinical information and literature delivery. The Company
believes that its new product stocking programs are more comprehensive than
any autoship or autocheck program, securing distribution in two-to-four times
the number of pharmacies than traditional wholesaler programs. All orders are
shipped through the pharmacist's preferred wholesaler or, on multi-source
products, the generic distributor. Every pharmacy stocking order is followed-
up and verified as received by the ordering pharmacy.
Access Worldwide simplifies vacant territory management without disruption
of targeted field sales force activities. Pharmaceutical drug representatives
on average miss four to six weeks of work each year due to maternity leave,
temporary reassignments, illnesses, etc. To maintain coverage during these
absences, pharmaceutical companies hire Access Worldwide to provide qualified,
well-trained representatives to
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telephonically replace absent drug representatives. The Company's dedicated
tele-detailing teams are proficient in making product presentations that
provide effective remote coverage, with full reporting and follow-through.
.Ethical Drug Sample and Literature Fulfillment. In 1998, the Company
shipped more than 10 million ethical drug product samples to physicians. It
has the nation's largest outsourced Prescription Drug Marketing Act of 1987
("PDMA") compliant and DEA approved sample fulfillment center in the United
States, located in Lincoln Park, New Jersey. Access Worldwide's customers
benefit from sophisticated sample fulfillment services that dramatically
reduce sample turnaround time, while providing comprehensive accountability
and tracking programs. A recent client audit found zero defaults and zero
unaccounted for samples. The Company also ships large volumes of product
literature to pharmaceutical sales representatives in the field. The Company's
Electronic Territory Management System ("ETMS") technology links to its
product sample and literature fulfillment operations to deliver fully
integrated sales support systems.
.Sales Force Productivity Systems. Access Worldwide improves the efficiency
of its clients' sales forces by providing them with a variety of outsourced
sales services as well as an integrated technological infrastructure and
support system designed to maximize sales force productivity in the field. The
Company's ETMS system allows geographically dispersed pharmaceutical sales
forces to report and track their efforts electronically. The ETMS system is
integrated into the Company's product sample and fulfillment facility,
physician database management systems, and direct mail systems. These
integrated field force automation systems typically require the Company to be
also integrated into the systems and sales force management structure of the
client's organization, thus raising the switching costs for the Company's
clients.
Access Worldwide also provides vacant territory management and remote
physician coverage to prevent disruption of planned field sales force
activities. The Company's dedicated tele-detailing teams are proficient in
making product presentations that assure effective and efficient virtual field
force coverage, with full reporting and follow-through.
. Medical Education Services. As the globalization of the healthcare
industry in this era of electronic communications redefines the pace of
scientific interchange, the Company's international experience and
capabilities are particularly valuable. Access Worldwide is highly experienced
in successful scientific program development, program planning, faculty
recruitment and support, meeting logistics, management and audience
generation.
The Company's scientific and medical expertise creates access to opinion
leaders in medicine. The Company has conducted more than 250 international
medical education meetings in more than 30 countries. With medical education
clients that include five of the top ten pharmaceutical companies, the Company
is knowledgeable about the changing regulatory requirements in countries
around the world.
The Company has excellent communications with medical societies and
journals, and has established relationships with medical schools and
continuing medical education offices. The Company delivers medical education
services in these varied meeting venues:
. Scientific Symposia
. Interactive Workshops
. University Programs
. Fellows Programs
. Investigator/Research Meetings
. Roundtables
. Advisory Board Meetings
. Sales Training Programs
.Patient Education Program Development. The Company develops patient
education communications programs in key therapeutic categories as part of its
medical education and medical publishing services.
.Patient Profiling and Data Collection. Access Worldwide has the capability
to capture product usage, frequency and satisfaction data from patient and
consumer contacts. The Company also captures patient data from its two new
patient prescription starter programs, which are described below.
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.Prescription Starter Programs. The Company recently added two new
proprietary patient prescription starter programs to the Company's family of
product sample systems: FirstRx(TM), a direct-to-patient product starter
program; and ScriptBuilder(TM), a coupon-based patient starter system that
delivers free trial starters to patients at the pharmacy. Both systems are
used to correctly begin patient treatment and compliance. These two programs
are already being used by three of the Company's pharmaceutical customers.
.Crisis Management Services. The Company provides crisis response
communications services for its pharmaceutical clients. The Company recently
managed an extensive product recall program for one of its medical device
clients, connecting directly to the client's website to update patient product
use information. The Company responds to patient questions and interfaces
electronically with its customers' databases to update patient files.
.Patient Customer Service and Support. Access Worldwide's inbound tele-
services capabilities can support patient information services, and the
delivery of resource information for patients and their families who are
enrolled in patient care and caregiver support programs. In addition, the
Company has arranged the replacement of medical devices, updating client
databases with patient product information.
Consumer and Business Services Segment
The Company delivers innovative marketing programs, systems and technologies
in the consumer and business services arena which enable its clients to access
new markets, acquire new customers, and activate current customers. Specific
services include the following:
.Consumer and Business Sales and Promotion Programs. The Company performs
targeted, consumer marketing and sales programs to improve customer
acquisition, customer retention and customer win-back performance for its
clients. The Company leverages its systems and technologies to improve
customer satisfaction and to support key sales and customer care needs.
.Customer Service and Support. Access Worldwide's inbound technology
infrastructure enables the Company to provide customer service and support
service to its clients on an outsourced basis. On behalf of its clients, the
Company responds to customer service inquiries, resolves customer billing
issues, registers consumers in media-driven promotional programs, and arranges
for replacement products when required.
.Multicultural Marketing Services. In light of the continued growth of
multicultural populations in the United States, the Company's multicultural
and multilingual expertise, resources and technology represent a powerful
differentiator to its telecommunications, financial services and consumer
products clients. Access Worldwide provides analysis and strategic direction
as to how its clients should most effectively target and approach high-
potential customers in high-value market segments. Strategic planning is
supported by the Company's research capabilities, which offer detailed
definitions and analyses of the market segments targeted by its clients,
including pharmaceutical companies and healthcare providers. The Company's
research group has been recognized by American Demographics Magazine as one of
the Best 100 Sources of Marketing Information.
The Company conducts qualitative and quantitative market research throughout
North and South America. The Company's research services encompass market area
profiles, target audience segmentation, marketing and advertising
effectiveness, culture market opportunity assessment, new product concepting
and testing, awareness, attitude and usage studies, opinion polling,
readership and viewership studies, and customer satisfaction surveys.
The Company also has significant expertise in collecting, analyzing,
organizing and communicating data. The Company has proprietary Hispanic and
Asian surname algorithm that its customers use to analyze their current
customer and prospect files. The Company works with data owned or acquired by
its clients for its patient and consumer services programs.
The Company's multicultural and multilingual staff executes consumer
services programs in over 15 non-English languages, including Arabic,
Cantonese, French, German, Hindi, Japanese, Khmer, Korean, Mandarin,
Portuguese, Russian, Spanish, Tagalog, Urdu and Vietnamese. For its healthcare
clients, the Company has the capability to deliver in-language, in-culture
direct-to-patient communications programs as well as patient monitoring and
compliance programs.
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Recent Developments
On June 15, 1998, the Company moved from the Fort Lauderdale facility into a
34,500 square foot facility located in Boca Raton, FL.
On August 13, 1998, the Company moved from the Dallas facility into a 26,000
square foot facility located in Plano, TX.
On October 24, 1998, the Company acquired all of the outstanding capital
stock of A M Medica Communications Ltd. ("A M Medica"). In consideration for
such stock, the Company paid to the stockholder of A M Medica $22.2 million in
cash, 122,045 shares of the Company's common stock, $.01 par value ("Common
Stock"), and a three year 6.5% subordinated promissory note in the principal
amount of $5.5 million. In addition, the purchase agreement called for cash in
excess of certain financial thresholds to be measured at various intervals
throughout 1998 and 1999. Any cash in excess of the financial thresholds is to
be paid to the original stockholder.
On November 2, 1998, the Company changed its name from
CulturalAccessWorldwide, Inc. to Access Worldwide Communications, Inc. and its
trading symbol from "CAWW" to "AWWC".
On February 23, 1999, the Company agreed to pay down $2.5 million of the
outstanding $6.5 million owed to holders of the mandatorily redeemable
preferred stock, series 1998 upon the closing of the new bank Credit Facility
described below.
On March 12, 1999, the Company entered into a three year, $65 million
revolving line of credit and term loan facility with a syndicate of banks led
by NationsBank, N.A. ("NationsBank") (the "Credit Facility"). The syndicate of
banks is also comprised of Fleet Bank, N.A., European American Bank and Summit
Bank. The Credit Facility bears interest at formula rates ranging from either
(i) the higher of (a) the Federal Funds Effective Rate plus 0.50% and (b) the
prime lending rate charged by NationsBank, N.A. from time to time, plus an
applicable margin ranging from 0.0% to 1.0% or (ii) LIBOR, plus an applicable
margin ranging from 1.25% to 2.50%. The Company is required to pay a
commitment fee on the unused portions of the Credit Facility. The Credit
Facility is secured by substantially all of the assets of the Company.
Industry Overview
The pharmaceutical outsourced marketing and the consumer and business
outsourced marketing services industries in which Access Worldwide operates
are high growth, high opportunity business environments driven by favorable
business trends. Key external growth drivers in these industries are:
.Growth in Outsourcing. The demand for outsourced marketing services is
growing rapidly as pharmaceutical companies look to outside service
organizations to supplement their internal product marketing, product sales
and direct-to-consumer activities. Outsourcing has proven to enable
pharmaceutical marketers to focus on core competencies, gain market share more
quickly, avoid incremental infrastructure costs and evaluate programs that
might be too costly to test internally. As companies outsource their marketing
or sales activities, they tend to develop dependent relationships with
outsourced marketing services firms. These relationships and high switching
costs tend to deter companies from moving such functions in-house.
In addition, recent regulatory changes in the pharmaceutical industry have
created a window of opportunity for growth-minded companies, leading them to
outsource marketing services to enhance their competitive position. For
example, industry consolidation and changes in Food and Drug Administration
("FDA") regulations regarding advertising directly to consumers have
drastically increased the amount of outsourced marketing services. In the
telecommunications industry, where large companies compete fiercely for
customers, increased outsourcing has allowed these companies to react nimbly
to competitive pressures in order to capture and maintain market share.
. Growth in Pharmaceutical Marketing Spending. Industry analysts project
that worldwide sales and marketing spending by pharmaceutical companies is
expected to increase from $5 billion in 1995 to approximately $8 billion in
2000, a 60% increase. Concurrently, outsourced sales and marketing by
pharmaceutical companies is expected to increase from $400 million in 1995 to
almost $1.5 billion in 2000, a 300% increase. The growth in pharmaceutical
industry outsourcing is driven in part by the desire for cost-effective,
measurable sales and marketing programs.
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.Growth in Multicultural Healthcare and Pharmaceutical Outreach Programs
Focused on High-Risk Disease Conditions. Presently, almost one-third of the
U.S. population is comprised of ethnic minorities and the number will continue
to grow according to the U.S. Census Bureau. Importantly, pharmaceutical and
healthcare marketers are recognizing that among the fastest growing segments
for their products and services in the United States are the Hispanic and
Asian populations. The U.S. Census Bureau has projected that the Hispanic and
Asian populations in the United States, which were comprised of approximately
27.8 million and 9.1 million people, respectively, in 1996, will grow at rates
of approximately 48% and 57%, respectively, by 2010, compared to a 12% growth
rate for the general population during the same period.
Leading pharmaceutical companies have introduced disease management programs
focused specifically on the Hispanic and African-American patient populations,
which tend to be at higher risk for conditions such as diabetes, hypertension,
stroke, coronary heart disease, certain forms of cancer, asthma, and seasonal
allergies. In addition, managed care organizations and hospitals have an
increasing need to reach their multilingual patients with in-language patient
education and follow-up programs to maintain their patients' confidence and
compliance with prescribed treatment. Access Worldwide's capabilities in
multilingual patient communications add value to managed care organizations,
hospitals and pharmaceutical companies who have embarked upon multilingual
patient disease management and outreach programs.
.Growth in Demand for Pharmaceutical and Healthcare Marketing Services that
Demonstrate a Clear and Measurable Return on Investment. Throughout the
pharmaceutical and healthcare industry, marketing executives are under
intensified pressure to prove that their plans and programs are cost-
effective. This pressure, coupled with the ability to measure results, has
been instrumental in the dramatic growth in the utilization of direct
marketing, direct-to-patient communications programs, sample fulfillment and
telesales/services.
The Direct Marketing Association ("DMA") reports that U.S. direct marketing
driven sales in 1992 were approximately $830.4 billion. By 1997, the DMA set
this figure at an estimated $1,226.2 billion with an annualized increase of
8%. That growth is expected to accelerate by the year 2002, increasing 8.7% a
year to $1,858.7 billion. Pharmaceutical marketers are increasing their
utilization of direct marketing services. In 1997, according to Dain Rauscher
Wessels, the pharmaceutical industry spent approximately $7.0 billion
promoting, marketing and selling its products through direct channels. This
spending is projected to grow at approximately 10% per year through the end of
the decade.
Growing pressures within companies in these industries to demonstrate a high
return on their marketing and sales investments have forced them to seek
outsourced services that provide a high level of accountability and
measurability. Outsourced marketing services firms that offer highly
measurable, database-driven direct marketing services and programs, including
teleservices and product sample fulfillment, are benefiting from this growing
need for corporate accountability.
.Growth in Importance of Customer Service and Loyalty Programs. Companies
operating in marketing-intensive industries are focused on protecting their
existing customer base and growing the lifetime value of individual customer
relationships as a means of improving both revenue growth and profitability.
There is an increasing recognition of the fundamental need to speak the
language of the customer in order to improve customer sales, retention and
win-back performance.
Quality Assurance
Access Worldwide uses its proprietary software and systems to monitor
carefully the progress of client projects. For example, management maintains
an ongoing oversight of the duration of customer teleservices presentations,
time between presentations, response time, number of queries resolved after
the first call and other statistics important in measuring and enhancing
productivity and service levels. Clients have daily access to a variety of
measures of service performance tracked by the Company's technology and can
monitor presentations directly through the Company's remote monitoring
systems. The Company's pharmaceutical sample dispensing and tracking systems
are designed to verify order accuracy and to audit data integrity.
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Contractual Arrangements
The Company operates under both multi-year and month-to-month contractual
relationships.
In the pharmaceutical/healthcare business, the compensation system is
divided into long-term and short-term programs. The long-term ("multi-year")
programs generate monthly fees and occasionally, bonuses based on specific
performance criteria such as market share increases or prescription order
growth. The short-term programs are primarily billed on a completed unit of
service basis, such as presentations delivered or pharmaceutical samples
forwarded. The medical education and meetings programs are invoiced with
progress billings.
In the multicultural teleservices business, hourly rate structures reflect
the specialized nature of the multilingual skills that exist throughout the
organization, as well as the extensive systems integration that the Company
has created with its clients.
Sprint is the only client that represented over 10% of the Company's total
revenues. The Company currently has a master service agreement with Sprint,
supported by numerous work orders each with their own pricing terms. The
Company's work for Sprint is spread throughout several different divisions of
Sprint ranging from outbound telemarketing to inbound customer service. The
master contract with Sprint expires on June 30, 1999 and is automatically
renewable for additional 12-month periods provided each party to the contract
remains satisfied with the contract terms. The Company was recently awarded
additional business to help Sprint grow and maintain its Asian-American market
share.
Competition
Access Worldwide competes in the outsourced marketing services industry,
which is highly competitive and fragmented. It competes with other outsourced
marketing services firms, ranging in size from very small firms offering
specialized applications or short-term projects to large independent firms.
The industry is beginning to consolidate and, as a result of competitive
pressures, factors such as quality of service, responsiveness to client
issues, reliability, flexibility, reputation and record of timeliness are
becoming increasingly important. While many companies provide outsourced
marketing services, management believes that no single company dominates the
industry.
The highly fragmented outsourced marketing services industry in which the
Company operates includes many independent and captive direct marketing
providers. In the direct marketing industry, no single company dominates the
market and many of the participants offer limited services. Conversely, in the
pharmaceutical teleservices industry alone, industry analysts have estimated
that there are relatively few providers who reach physicians and pharmacists.
Other areas in which the Company competes such as market research, medical
education and medical meetings management are particularly fragmented.
Alternatively, the ethical drug sample fulfillment industry is highly
specialized, with a limited number of quality competitors due to the high cost
and regulatory requirements for entry. Currently, there is a trend toward
consolidation, and Access Worldwide is capitalizing on this trend through
strategic acquisitions. These acquisitions increase the Company's ability to
provide Fortune 500 companies with integrated outsourced marketing solutions
for high-growth market segments.
The Company believes that it competes successfully based on its ability to
deliver an effective combination of resources, people, expertise, systems,
data and technologies that provide innovative, measurable and cost-effective
services which increase client sales, market share and profits. The Company
provides differentiated value-added services that help its clients attract new
customers, protect existing client relationships and increase the lifetime
value of all customer relationships. The Company believes that its ability to
provide both strategic and tactical solutions, supported by systems and
technology, differentiates it in the highly fragmented marketing services
industry.
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Government Regulation
Several industries in which the Company's clients operate are subject to
varying degrees of governmental regulation, particularly the pharmaceutical,
healthcare and telecommunications industries. Generally, compliance with these
regulations is the responsibility of the Company's clients. However, the
Company could be subject to a variety of enforcement or private actions for
its failure or the failure of its clients to comply with such regulations.
Pharmaceutical companies, in particular, and the healthcare industry, in
general, are subject to significant federal and state regulation. The
Company's handling and distribution of samples of pharmaceutical products are
subject to regulation by its clients, the DEA, the FDA and other applicable
federal, state and local laws and regulations, including the PDMA. Currently,
the healthcare industry is monitoring potential passage of new regulations
under the PDMA which would impose even stricter requirements in the areas of
storage, inventory control and lot number tracking.
In addition, the Company must comply with regulations promulgated by
professional associations such as the AMA. The AMA has established ethical
guidelines which govern receipts of gifts to physicians from health related
entities, including any items received during peer-to-peer meetings and
symposia sponsored by pharmaceutical companies.
The pharmaceutical industry is also subject to federal regulation by the
FDA. The Federal Food, Drug and Cosmetics Act regulates the approval,
labeling, advertising, promotion, sales and distribution of drugs, which
includes the distribution of product samples to physicians. The FDA also
regulates all promotional activities involving prescription drugs. There can
be no assurance that additional federal or state legislation regulating the
pharmaceutical or healthcare industries would not limit the scope of the
Company's product sampling services or significantly increase the cost of
regulatory compliance.
The Federal Communications Commission ("FCC") rules under the Federal
Telephone Consumer Act of 1991, limit the hours during which telemarketers may
call consumers and prohibit the use of automated telephone dialing equipment
to call certain telephone numbers. The Federal Telemarketing and Consumer
Fraud and Abuse Protection Act of 1994 ("TCFAPA") broadly authorizes the
Federal Trade Commission ("FTC") to issue regulations prohibiting
misrepresentation in telephone sales. In August 1995, the FTC issued
regulations under the TCFAPA, which, among other things, require telemarketers
to make certain disclosures when soliciting sales. The Company believes its
operating procedures comply with the telephone solicitation rules of the FCC
and FTC. However, there can be no assurance that additional federal or state
legislation, or changes in regulatory implementation, would not limit the
activities of the Company or its clients in the future or significantly
increase the cost of regulatory compliance.
Two bills recently introduced in Congress included provisions requiring
parental consent to any sale of lists of minors. Though neither of these bills
was reported out of committee, there can be no assurance that similar
legislation will not be passed in the future at the federal or state level.
Any substantial legal restriction on the use or sale of marketing lists could
have a material adverse effect on the Company.
One of the significant regulations of the FCC applicable to long distance
carriers, such as Sprint, prohibits the unauthorized switching of subscribers'
long distance carriers, known in the industry as "slamming." A fine of up to
$100,000 may be imposed by the FCC for each instance of slamming. In order to
prevent unauthorized switches, federal law requires that switches authorized
over the telephone, such as through the Company's teleservices, be verified
contemporaneously by a third party. The Company believes its procedures comply
with this third-party verification requirement.
Third-party verification generally is not required for switches obtained in
person, such as those obtained by members of a direct field sales force. The
Company's training and other procedures are designed to prevent
8
<PAGE>
unauthorized switching. However, as with any sales force, the Company cannot
completely ensure that each employee will always follow the Company's mandated
procedures. Accordingly, it is possible that employees may in some instances
engage in unauthorized activities, including slamming. The Company
investigates customer complaints reported to it by its telecommunications
clients and reports the results to such clients. To the Company's knowledge,
no FCC complaint has been brought against any of its clients as a result of
the Company's services, although the Company believes that the FCC is
examining the sales activities of long distance telecommunications providers,
including the Company's clients, and the activities of outside vendors, such
as the Company, used by such providers. If any complaints were brought, the
Company's client might assert that such complaints constituted a breach of its
agreement with the Company and, if material, seek to terminate the contract.
Any termination by Sprint would be likely to have a material adverse effect on
the Company. If such complaints resulted in fines being assessed against a
client of the Company, the client could seek to recover such fines from the
Company.
Employees
As of December 31, 1998, the Company had approximately 1,400 employees. None
of the Company's employees is represented by a labor union and the Company is
not aware of any current activity to organize any of its employees. Management
considers relations between the Company and its employees to be good.
Item 2. Properties
Access Worldwide's principal executive offices are located in Arlington,
Virginia. The Company's segments operate in California, Florida, New York, New
Jersey, Texas and Virginia.
<TABLE>
<CAPTION>
Approx.
Location Principal Use Square Feet
---------------- ----------------------------------------------- -----------
<C> <S> <C>
Arlington, VA Corporate Offices 5,000
Consumer and Business Services Segment:
Arlington, VA Customer Sales and Service Programs 25,300
Plano, TX Customer Sales and Service Programs 21,400
Pharmaceutical Marketing Services Segment:
Physician and Pharmacy Tele-detailing;
Boca Raton, FL Patient/Customer Services 34,500
Lincoln Park, NJ Ethical Drug Sample and Literature Fulfillment,
Sales Force Productivity Systems 120,000
New York, NY Medical Education Services 7,000
Market Research:
Los Altos, CA Market Research 4,088
Los Angeles, CA Market Research 1,395
</TABLE>
Item 3. Legal Proceedings
From time to time, the Company is party to certain claims, suits and
complaints which arise in the ordinary course of business. Currently, there
are no such claims, suits or complaints which, in the opinion of management,
would have a material adverse effect on the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the quarter
ended December 31, 1998.
9
<PAGE>
Part II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
(a) Market Information
On February 13, 1998, the Company completed the initial public offering
("Offering") of its Common Stock at an initial public offering price of $12.00
per share. The Common Stock trades on the NASDAQ National Market ("Nasdaq")
under the symbol "AWWC." The following table sets forth the high and low
closing sale prices for the Company's Common Stock as reported by Nasdaq for
the periods indicated:
<TABLE>
<CAPTION>
Market Prices
-------------
1998 Fiscal Quarters High Low
-------------------- -------------
<S> <C> <C>
First Quarter............................................... 16.00 10.88
Second Quarter.............................................. 16.38 8.13
Third Quarter............................................... 10.13 3.00
Fourth Quarter.............................................. 9.75 2.63
</TABLE>
(b) Holders
The number of holders of Common Stock as of March 15, 1999 was approximately
1,750. The Company included individual participants in security position
listings in calculating the number of holders.
(c) Dividends
The Company did not pay cash dividends on its Common Stock during the year
ended December 31, 1998 and does not anticipate paying cash dividends on its
Common Stock in the foreseeable future. The Company's Credit Facility
prohibits the payment of cash dividends.
Recent Sales of Unregistered Securities
1. Simultaneously with the consummation of the Company's Offering on
February 13, 1998, Abbingdon Venture Partners Limited Partnership-II and
Abbingdon Venture Partners Limited Partnership-III (collectively, the
"Partnerships") (x) exchanged (a) 18,000 shares of 8% Cumulative Preferred
Stock and (b) 18,000 shares of 8% Preferred Stock, Series 1997 and (y)
converted $2.9 million of the principal amount of promissory notes due to the
Partnerships for an aggregate of 65,000 shares of Preferred Stock, Series 1998
(the "1998 Preferred Stock"). The shares of 1998 Preferred Stock were issued
exclusively at the time to existing security holders of the Company where no
commission or other remuneration was paid and such issuance was therefore made
in reliance on Section 3(a)(9) of the Securities Act of 1933 (the "Securities
Act").
2. On July 28, 1998, as part of the contingent payments due to the seller of
certain assets of the TeleManagement Services business, which the Company
acquired in January 1997, the Company issued an aggregate of 70,851 shares of
Common Stock. Registration under the Securities Act of the Common Stock issued
in this transaction was not required because such securities were issued in a
transaction not involving any "public offering" within the meaning of Section
4(2) of the Securities Act, in reliance on Rule 506 under the Securities Act.
In connection therewith, the Company has obtained a representation from the
stockholder to the effect that it was an "accredited investor" as defined in
Rule 501(a) under the Securities Act. In addition, there was no general
solicitation or general advertising in connection with such issuance.
3. On October 24, 1998, as part of the purchase price for all of the common
stock of A M Medica, the Company issued 122,045 shares of Common Stock out of
the treasury of the Company to the sole stockholder of A M Medica.
Registration under the Securities Act of the Common Stock issued in this
transaction was not required because such securities were issued in a
transaction not involving any "public offering" within the meaning of Section
4(2) of the Securities Act, in reliance on Rule 506 under the Securities Act.
In connection therewith, the Company has obtained a representation from the
stockholder to the effect that she was an "accredited investor" as defined in
Rule 501(a) under the Securities Act. In addition, there was no general
solicitation or general advertising in connection with such issuance.
10
<PAGE>
Item 6. Selected Financial Data (In Thousands Except for Per Share Data)
The selected statement of operations data for the quarters ended March 31,
June 30, and September 30, 1998 and 1997 have been derived from unaudited
Financial Statements of the Company, included in Forms 10-Q filed by the
Company. December 31, 1998 and 1997 statement of operations data have been
derived from audited Financial Statements of the Company included elsewhere in
this Report on Form 10-K. The following selected financial data should be read
in conjunction with the Financial Statements and the Notes thereto of the
Company, and Management's Discussion and Analysis of Financial Condition and
Results of Operations included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
Quarters Ended
---------------------------------------------
June
March 31, 30, September 30, December 31,
1998 1998 1998 1998
--------- ------- ------------- ------------
<S> <C> <C> <C> <C>
Statements of Operations Data:
Revenues........................ $15,691 $15,325 $16,381 $25,837
Cost of revenues................ 9,110 8,491 8,652 14,839
------- ------- ------- -------
Gross profit.................... 6,581 6,834 7,729 10,998
Selling, general and
administrative................. 4,804 4,678 5,551 6,550
Amortization expense............ 400 309 368 654
------- ------- ------- -------
Income from operations.......... 1,377 1,847 1,810 3,794
Interest (expense) income....... (466) (116) 117 (293)
Other income.................... -- -- -- 4
------- ------- ------- -------
Income before income taxes...... 911 1,731 1,927 3,505
Tax expense..................... 398 767 845 1,542
------- ------- ------- -------
Net income...................... $ 513 $ 964 $ 1,082 $ 1,963
======= ======= ======= =======
Earnings per share
Basic......................... $ 0.07 $ 0.11 $ 0.12 $ 0.22
======= ======= ======= =======
Diluted....................... $ 0.07 $ 0.11 $ 0.12 $ 0.21
======= ======= ======= =======
<CAPTION>
Quarters Ended
---------------------------------------------
June
March 31, 30, September 30, December 31,
1997 1997 1997 1997
--------- ------- ------------- ------------
<S> <C> <C> <C> <C>
Statements of Operations Data:
Revenues........................ $ 6,962 $ 8,063 $ 9,013 $12,615
Cost of revenues................ 4,064 4,766 5,605 7,378
------- ------- ------- -------
Gross profit.................... 2,898 3,297 3,408 5,237
Selling, general and
administrative................. 1,392 1,910 2,029 3,578
Amortization expense............ 209 147 191 354
------- ------- ------- -------
Income from operations.......... 1,297 1,240 1,188 1,305
Interest (expense).............. (577) (507) (393) (851)
Other (expense) income.......... (300) (156) 153 6
------- ------- ------- -------
Income before income taxes...... 420 577 948 460
Tax expense..................... 241 253 447 240
------- ------- ------- -------
Net income...................... $ 179 $ 324 $ 501 $ 220
======= ======= ======= =======
Earnings per share
Basic......................... $ 0.04 $ 0.07 $ 0.11 $ 0.06
======= ======= ======= =======
Diluted....................... $ 0.04 $ 0.07 $ 0.10 $ 0.05
======= ======= ======= =======
</TABLE>
11
<PAGE>
The selected statement of operations data and the selected balance sheet
data have been derived from the audited Financial Statements of the Company.
The following selected financial data should be read in conjunction with the
Financial Statements and the Notes thereto of the Company and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
Five Months
Year Ended Ended Years Ended December 31,
July 31, December 31, ---------------------------------------------------
1994 1994 1995 1996 1997 1998
---------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $4,397 $2,728 $9,047 $16,286 $36,653 $73,234 (2)
Cost of revenues........ 1,720 1,437 4,396 8,639 21,813 41,091
------ ------ ------ ------- ------- --------
Gross profit............ 2,677 1,291 4,651 7,647 14,840 32,143
Selling, general and
administrative......... 2,715 807 4,540 7,754 9,810 23,315
------ ------ ------ ------- ------- --------
Income (loss) from
operations............. (38) 484 111 (107) 5,030 8,828
Interest (expense)
income................. (3) (2) 24 (101) (2,327) (759)
Other income (expense).. -- -- 5 (200) (297) 4
------ ------ ------ ------- ------- --------
Income (loss) before
income taxes........... (41) 482 140 (408) 2,406 8,073
Tax (expense)
benefit(1)............. -- -- -- 88 (1,181) (3,552)
------ ------ ------ ------- ------- --------
Net (loss) income....... $ (41) $ 482 $ 140 $ (320) $ 1,225 $ 4,521
------ ------ ------ ------- ------- --------
Net income (loss) per
common share
-- basic(3)............ $ (0.07) $ 0.26 $ 0.52
======= ======= ========
Net income (loss) per
common share
-- diluted(3).......... $ (0.07) $ 0.26 $ 0.51
======= ======= ========
<CAPTION>
As of
---------------------------------------------------------------------------
July 31, December 31, December 31, December 31, December 31, December 31,
1994 1994 1995 1996 1997 1998
---------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Current assets.......... $1,110 $ 994 $2,463 $16,963 $12,384 $ 23,914
Total assets............ 1,240 1,152 2,749 29,454 52,680 104,422
Current liabilities..... 996 429 2,159 16,757 17,336 21,945
Long-term debt, less
current maturities..... 10 6 -- 16,201 34,319 29,847
Mandatorily redeemable
preferred stock........ -- -- -- 1,800 3,888 6,500
Common stockholders'
equity (deficit)....... 234 717 590 (5,304) (2,863) 46,130
</TABLE>
- --------
(1) In December 1996, the Company became a C Corporation for income tax
purposes. Prior to that, the Company was an S Corporation.
(2) On October 24, 1998, the Company acquired all of the outstanding capital
stock of A M Medica in a transaction accounted for as a purchase.
(3) The earnings per share information has been excluded for the years ended
July 31, 1994 and December 31, 1995 and the five months ended December 31,
1994. Prior to the Recapitalization on December 6, 1996, the information
is not meaningful.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with Selected
Financial Data and the Financial Statements and the Notes thereto included
elsewhere in this Form 10-K.
12
<PAGE>
OVERVIEW
Access Worldwide Communications, Inc., formerly known as
CulturalAccessWorldwide, Inc. and /or CulturalAccess, is an outsourced
marketing services company that assists more than 100 clients in the
pharmaceutical, telecommunications, financial services and consumer products
industries. The Company designs and delivers innovative, data-driven sales and
marketing solutions that maximize clients' sales and profits. The Company has
particular expertise in reaching key pharmaceutical audiences--physicians,
pharmacists and patients--and targeted consumer groups. Access Worldwide's
resources include proprietary databases of targeted consumers, physicians and
pharmacies; strategic planning and market research services; medical
education; medical meetings management; medical publications; inbound and
outbound teleservices in 15 different languages; ETMS and DEA approved drug
sample fulfillment and direct mail capabilities. Access Worldwide has over
1,400 employees and representatives in offices throughout the United States.
REVENUES
The Company provides a variety of services for a diverse client base. The
major forms of revenue collection and recognition are as follows:
. The Company leases ETMS equipment to clients on a per salesperson basis.
Revenues are recognized either under an operating or sales-type lease.
. For customized or non-standard database projects, the Company bills
either on a fixed fee or on a per item basis, and revenues are
recognized upon delivery of data. Monthly or scheduled data services are
billed and revenue recognized upon delivery of data.
. For sampling and fulfillment activities, the Company bills and
recognizes revenue on a per item basis.
. For teleservices projects, the Company bills clients and recognizes
revenue on one of the following bases: production hours, completed
presentations, phone calls placed or received, and sales made per hour
or a fixed monthly fee. Revenues are recognized as the services are
completed.
. For medical education and meeting programs, the Company generally bills
and collects fixed project fees over the life of the project including a
percentage of the total project cost at the execution of the work order.
Revenues are recognized on the percentage of completion method.
. For market research projects, the Company generally bills and collects
fixed project fees in periodic installments over the life of the project
including a percentage of the total project costs at the execution of a
contract. Revenues are recognized on the percentage of completion
method.
COST OF REVENUES
Cost of revenues consists of expenses specifically associated with client
service revenues. The cost of revenues includes salaries and benefits,
commissions paid to sales personnel, purchased services for clients and
telephone charges.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses include staff functions such as
accounting, information technology and human resources, as well as expenses
not directly linked to client service revenues, such as depreciation,
amortization and rental expenses.
RESULTS OF OPERATIONS BY SEGMENT FOR 1998 AND 1997
The following table sets forth, for the periods indicated, certain
statements of operations data by segment obtained from the Company's
statements of operations. See Note 18 of the Notes to the Company's Financial
Statements for the definition of the segments. There can be no assurance that
trends in operating results will continue in the future.
13
<PAGE>
<TABLE>
<CAPTION>
Consumer Pharmaceutical
---------------------- -----------------------
1997 1998 Change 1997 1998 Change
------- ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Statements of Operations Data
in Thousands:
Revenues....................... $23,527 $30,033 $6,506 $12,349 $39,747 $27,398
Cost of revenues............... 14,648 17,654 3,006 6,811 21,916 15,105
------- ------- ------ ------- ------- -------
Gross profit................... 8,879 12,379 3,500 5,538 17,831 12,293
Selling, general and
administrative................ 4,472 7,301 2,829 3,033 9,305 6,272
Amortization expense........... 333 339 6 539 1,309 770
------- ------- ------ ------- ------- -------
Operating profit............... $ 4,074 $ 4,739 $ 665 $ 1,966 $ 7,217 $ 5,251
</TABLE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenues for the Company increased $36.6 million, or 99.8%, to $73.2 million
for the year ended December 31, 1998, compared to $36.6 million for the year
ended December 31, 1997. Revenues for the Consumer Segment increased $6.5
million, or 27.6%, to $30.0 million for the year ended December 31, 1998,
compared to $23.5 million for the year ended December 31, 1997. The increase
in the Consumer Segment is primarily the result of continued growth in the
business with Sprint. Revenues for the Pharmaceutical Segment increased $27.4
million, or 222%, to $39.7 million for the year ended December 31, 1998,
compared to $12.3 million, for the year ended December 31, 1997. The increase
in revenues for the Pharmaceutical Segment is primarily the result of twelve
months of revenues included in 1998 for Phoenix Marketing Group ("Phoenix") as
compared to two months in 1997, and the acquisition of A M Medica in October
1998. Approximately $25.1 million of the $27.4 million increase in revenues
for the Pharmaceutical Segment was the result of the acquisitions of Phoenix
and A M Medica.
Cost of revenues for the Company increased $19.3 million, or 88.4%, to $41.1
million for 1998, compared to $21.8 million in 1997. Cost of revenues as a
percentage of revenues for the Company declined to 56.1% for 1998, from 59.5%
for 1997. Cost of revenues as a percentage of revenues for the Consumer
Segment declined to 58.8% for 1998, from 62.3% for 1997. The decrease was the
result of better utilization of the Company's existing work force because of
improved facilities and work practices changes. Cost of revenues as a
percentage of revenues for the Pharmaceutical Segment for 1998 compared to
1997 did not materially change. However, a decrease of 4.8% resulted primarily
due to reductions in the existing work force at the Florida telemarketing
facility, and the decrease in the ratio of supervisory personnel to total
telemarketers. The decrease of 4.8% was offset primarily by the acquisition of
A M Medica.
Selling, general and administrative expenses for the Company increased $12.7
million, or 142.3%, to $21.6 million for 1998, compared to $8.9 million for
1997. Selling, general and administrative expenses as a percentage of revenues
increased to 29.5% for 1998, when compared to 24.3% for 1997. Selling, general
and administrative expenses as a percentage of revenues for the Consumer
Segment increased to 24.3% for 1998, from 19.0% for 1997. The increase was
primarily the result of increases in personnel related costs needed to support
the growth of this segment. Selling, general and administrative expenses as a
percentage of revenues for the Pharmaceutical Segment decreased slightly to
23.4% for 1998, compared to 24.6% for 1997. The acquisition of A M Medica
resulted in a decrease of 5.7% in the selling, general and administrative
expenses as a percentage of revenues. The decrease of 5.7% was partially
offset by an increase in the selling, general and administrative expenses as a
percentage of revenues due to the acquisition of the Company's sample
fulfillment/sales productivity business, which has a different cost structure
than the other businesses, and the expansion of the Florida telemarketing
facility. Corporate expenses as a percentage of revenues increased to 4.6% in
1998, from 2.8% in 1997. The increase is due to the creation of the corporate
infrastructure in the later part of 1997, needed to support the Company's
future growth.
Amortization expense for the Company increased $831,000, or 92.2%, to $1.7
million for 1998, from $901,000 for 1997. The Consumer Segment amortization
expense did not materially increase from 1997 to 1998. Amortization expense
for the Pharmaceutical Segment increased by approximately $770,000.
Approximately
14
<PAGE>
$416,000 of the increase is due to the acquisition of Phoenix that did not
occur until October 1997. The acquisition of A M Medica in October 1998
resulted in additional amortization expense of approximately $287,000.
Net interest expense for the Company decreased $1.6 million, to $759,000 for
1998 compared with interest expense of $2.3 million for 1997 as proceeds from
the Offering were used to reduce borrowings.
The income tax provision for the Company for 1998 increased to $3.6 million,
from $1.2 for 1997. The increase is due primarily to the increase in pretax
earnings, allowing the Company to benefit from an effective tax rate of 44%
for 1998, as opposed to 48% for 1997.
RESULTS OF OPERATIONS BY SEGMENT FOR 1997 AND 1996
The following table sets forth, for the periods indicated, certain
statements of operations data for the Consumer Segment obtained from the
Company's statements of operations. The table excludes the Pharmaceutical
Segment since it was established in 1997 and did not exist in 1996. See Note
18 of the Company's Financial Statements for the definition of the segments.
There can be no assurance that trends in operating results will continue in
the future.
<TABLE>
<CAPTION>
Consumer
-----------------------
1996 1997 Change
------- ------- ------
<S> <C> <C> <C>
Statements of Operations Data in Thousands:
Revenues.............................................. $16,286 $23,527 $7,241
Cost of revenues...................................... 8,640 14,648 6,008
------- ------- ------
Gross profit.......................................... 7,646 8,879 1,233
Selling, general and administrative................... 7,727 4,472 (3,255)
Amortization expense.................................. 27 333 306
------- ------- ------
Operating (loss) profit............................... $ (108) $ 4,074 $4,182
======= ======= ======
</TABLE>
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenues for the Company increased $20.4 million, or 125.1%, from $16.3
million for the year ended December 31, 1996 to $36.7 million for the year
ended December 31, 1997. Revenues for the Consumer Segment increased $7.2
million, or 44.5%, from $16.3 million for 1996 to $23.5 million in 1997. The
increase was primarily the result of continued growth in the demand for
services from existing clients for whom the Company markets long distance
services to residential customers in certain multicultural groups. The
Pharmaceutical Segment was established during 1997 with the acquisitions of
Telemanagement Services, Inc. ("TMS") and Phoenix. The revenues contributed by
this Segment during 1997 were approximately $12.3 million.
Cost of revenues for the Company increased $13.2 million, or 152.5%, from
$8.6 million in 1996 to $21.8 million in 1997. Cost of revenues as a
percentage of revenues increased from 53.0% for 1996 to 59.5% for 1997. Cost
of revenues as a percentage of revenues for the Consumer Segment increased to
62.3% in 1997, from 53.1% in 1996. This increase was primarily due to the
addition of new and temporary employees to support the Company's expanded
programs. In addition, short lead times on new projects required the Company
to utilize overtime and higher-priced contract labor to complement existing
personnel. The Pharmaceutical Segment cost of revenues as a percentage of
revenues for 1997 was approximately 55.1%. The establishment of this Segment
resulted in a decrease in the cost of revenues as a percentage of revenues for
the Company of approximately 2.2%.
Selling, general and administrative expenses for the Company increased $2.1
million, or 26.5%, from $7.8 million for 1996 to $9.8 million for 1997.
Selling, general and administrative expenses as a percentage of revenues
decreased from 47.6% for 1996 to 26.8% for 1997. Selling, general and
administrative expenses as a
15
<PAGE>
percentage of revenues for the Consumer Segment decreased from 47.6% for 1996,
to 20.4% for 1997. Prior to the Recapitalization (see Note 2 of Notes to the
Company's Financial Statements), many of the services used by the Consumer
Segment, were provided by related-party companies. The Company has since
entered into new contracts that have reduced the costs of such services.
Interest expense increased to $2.3 million for 1997, compared with interest
expense of $101,000 for 1996, primarily due to interest expense related to
certain indebtedness incurred to finance the Recapitalization (see Note 2 of
Notes to the Company's Financial Statements) and the acquisitions of TMS,
Cultural Access Group ("CAG"), and Phoenix.
Income tax expense for 1997 was $1.2 million. Prior to December 31, 1996,
the Company had elected to be subject to taxation under Subchapter S of the
Internal Revenue Code of 1986, as amended, and, therefore, no federal income
tax expense was recorded for the year ended December 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1998, the Company had working capital of $2.0 million, an
increase of $7.0 million from ($5.0) million at December 31, 1997. As
described below, substantially all of the Company's working capital resulted
from the completion of its Offering in February 1998. The Company's primary
resources of liquidity consist of cash and cash equivalents, and accounts
receivable.
Net cash provided by operating activities during 1998 was $5.5 million,
compared to $2.4 provided by operating activities during 1997. Accounts
receivable increased by $11.9 million to $20.0 million for 1998, compared to
$8.1 million for 1997. The increase in accounts receivable is primarily the
result of the increase in sales and the acquisition of A M Medica's accounts
receivable of $7.0 million. The Company's accounts receivable turnover
averaged 57 days for the year ended December 31, 1998, compared to 58 days for
the year ended December 31, 1997. Accounts payable and accrued expenses as of
December 31, 1998, increased to $11.8 million, compared to $2.8 million as of
December 31, 1997. The increase in accounts payable and accrued expenses is
primarily related to the A M Medica acquisition. A M Medica's accounts payable
and accrued expenses at December 31, 1998 were approximately $7.6 million.
Net cash used in investing activities for 1998 was $42.6 million, compared
to $6.8 million in 1997. Cash of approximately $5.7 million was used for the
expansion of the Company's facilities, and for upgrading computer and
telephone systems. During 1998, the Company used approximately $33.2 million
for the acquisition of A M Medica. In addition, the Company recorded
approximately $3.7 million of additional purchase price due to former owners
of acquired businesses because specified financial criteria indicated in the
purchase agreements were attained during 1998.
Net cash provided by financing activities was $36.9 million for 1998,
compared to $6.1 million in 1997. During 1998, the Company raised additional
capital of $44.6 million in the Offering. Approximately $36.4 million of the
proceeds was used to retire long term related party debt. In addition, the
Company drew approximately $25.6 million against the prior Credit Facility (as
defined in Note 8 of the Notes to the Company's Financial Statements)
established in January, 1998. Approximately $22.0 million of the $25.6 million
draw was used to finance the acquisition of A M Medica, and the remainder was
used to finance the expansion of the facilities and fund working capital.
The Company expects to meet its short term liquidity requirements through
net cash provided by operations and borrowing under the new Credit Facility
(as defined in Note 20 of the Notes to the Company's Financial Statements)
entered into on March 12, 1999. Management believes that these sources of cash
will be sufficient to meet the Company's operating needs and planned capital
expenditures for at least the next twelve months.
MARKET RISK
Access Worldwide is exposed to certain market risks arising from
transactions that are entered into in the normal course of business or from
acquisitions made. The primary market risk to which the Company is exposed
16
<PAGE>
is interest rate changes. The Company's objective in managing its exposure to
interest rate changes is to limit the impact of these changes on earnings and
cash flow. The Company manages interest rate exposure through the debt to
equity ratio required by the loan covenants in its credit agreements and its
ability to convert interest rate from the banks Base Rate to the Eurodollar
rate (see Notes 8 and 20 of Notes to the Company's Financial Statements). A
10% increase in interest rates would affect the Company's debt obligations and
reduce future earnings by approximately $167,000. However, a 10% reduction in
interest rates would increase the future earnings by approximately the same
amount.
YEAR 2000 ISSUE
As a rapidly growing outsourced marketing service company, the Company is
dependent on computer systems and applications to conduct its business. Some
computer systems and applications include programming code in which calendar
year data is abbreviated to only two digits. As a result of this design
decision, some of these systems could fail to operate or fail to produce
correct results if "00" is interpreted to mean 1900, rather than 2000. These
problems are commonly referred to as the "Millennium Bug" or "Year 2000
Problem."
The Company has developed and is currently executing a comprehensive risk-
based plan designed to make its computer systems, applications and facilities
Year 2000 ready. The plan covers four stages including (i) identification,
(ii) assessment, (iii) remediation, and (iv) testing.
The Company has completed the process of identifying all of the major
computers, software applications, and related equipment used in connection
with its internal operations that must be modified, upgraded, or replaced to
minimize the possibility of a material disruption to its business. The Company
is currently in the process of the assessment and remediation stages of
modifying, upgrading, and replacing major systems that have been identified as
adversely affected, and expects to complete this process before the end of the
second quarter of 1999. The testing stage is projected to be completed by the
third quarter of 1999.
In addition to computers and related systems, the operation of office
equipment, such as fax machines, photocopiers, telephone switches, security
systems, elevators and other common devices may be affected by the Year 2000
Problem. The Company continues to assess the potential effects of, and cost of
remediating, the Year 2000 Problem on its office equipment.
The Company has incurred costs to date of $98,000 and estimates the total
cost of any required modifications, upgrades, or replacements of its internal
systems to be $200,000. While the estimated cost of these efforts is not
expected to be material to the Company's financial position or any year's
results of operations, there can be no assurance to this effect. The estimated
cost will be monitored and will be revised as additional information becomes
available.
The Company is communicating with its major clients and suppliers to
determine the extent to which the Company's interface systems are vulnerable
to those third parties' failure to remediate their own Year 2000 Problems.
There can be no assurance that these clients and suppliers will resolve any or
all Year 2000 Problems with their systems before the occurrence of a material
disruption to the business of the Company. Any failure of these clients and
suppliers to resolve Year 2000 Problems with their systems in a timely manner
could have a material adverse effect on the Company's business, financial
condition, and results of operations.
The Company expects to identify and resolve all Year 2000 Problems that
could materially adversely affect its business operations. However, since the
number of devices that could be effected and the interactions among these
devices are numerous, management believes that it is not possible to determine
with complete certainty that all Year 2000 Problems affecting the Company have
been identified or corrected.
The Company is developing contingency plans to be implemented as part of its
efforts to identify and correct Year 2000 Problems affecting its internal
systems. The Company expects to complete its contingency plans by second
quarter 1999. Depending on the systems affected, these plans could include
accelerated
17
<PAGE>
replacement of affected equipment or software, short to medium-term use of
backup equipment and software, increased work hours for Company personnel or
use of contract personnel to correct on an accelerated schedule any Year 2000
Problems that arise or to provide manual workarounds for information systems,
and similar approaches. If the Company is required to implement any of these
contingency plans, it could have a material adverse effect on the Company's
financial condition and results of operations.
The discussion of the Company's efforts, and management's expectations,
related to Year 2000 compliance are forward-looking statements. The Company's
ability to achieve Year 2000 compliance and the level of incremental costs
associated therewith, could be adversely impacted by, among other things, the
availability and cost of programming and testing resources, vendors' ability
to modify proprietary software, and unanticipated problems identified in the
ongoing compliance review.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
None.
Item 8.Financial Statements and Supplementary Data
Index to Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants..................................... 19
Balance Sheets........................................................ 20
Statements of Operations.............................................. 21
Statements of Changes in Common Stockholders' Equity (Deficit)........ 22
Statements of Cash Flows.............................................. 23
Notes to Financial Statements......................................... 24
</TABLE>
18
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders of Access Worldwide Communications,
Inc.
In our opinion, the financial statements listed in the index appearing under
Item 14(a)(1) and (2) on page 41 present fairly, in all material respects, the
financial position of Access Worldwide Communications, Inc. and its
subsidiaries at December 31, 1998 and 1997 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998 in conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PriceWaterhouseCoopers LLP
Philadelphia, PA
February 24, 1999
19
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
BALANCE SHEETS
(See Note 1 regarding Basis of Presentation)
As of December 31,
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 1,912,219 $ 2,014,711
Accounts receivable, net of allowance for doubtful
accounts of
$184,801, and $279,935, respectively.............. 20,046,495 8,077,462
Deferred issuance costs............................ -- 1,350,594
Other assets....................................... 1,955,322 941,686
------------ -----------
Total current assets............................... 23,914,036 12,384,453
Property and equipment, net........................ 8,565,188 4,171,806
Other assets....................................... 917,197 265,110
Intangible assets, net............................. 71,025,795 35,858,750
------------ -----------
Total assets....................................... $104,422,216 $52,680,119
============ ===========
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK
AND COMMON STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Amount due on line of credit facility.............. $ -- $ 5,810,000
Current portion of indebtedness.................... 63,431 69,940
Current portion of indebtedness--related parties... 2,421,770 3,203,819
Accounts payable and accrued expenses.............. 11,787,231 2,831,463
Accrued interest and other related party expenses.. 3,623,293 2,974,661
Accrued salaries, wages and related benefits....... 2,007,827 1,308,446
Due to related parties............................. 42,303 471,925
Deferred revenue................................... 1,998,486 666,082
------------ -----------
Total current liabilities.......................... 21,944,341 17,336,336
Long-term portion of indebtedness.................. 25,609,170 80,013
Long-term portion of indebtedness--related
parties........................................... 4,238,310 34,238,666
Mandatorily redeemable preferred stock, $.01 par
value: 8%
cumulative as of February 10, 1998 and December 31,
1997,
respectively, 2,000,000 shares authorized, 65,000
shares and
36,000 shares issued and outstanding,
respectively...................................... 6,500,000 3,888,000
------------ -----------
Total liabilities and mandatorily redeemable
preferred stock................................... 58,291,821 55,543,015
------------ -----------
Commitments and contingencies (Notes 9 and 16)
Common stockholders' equity (deficit):
Common stock, $.01 par value: voting: 20,000,000
shares
authorized; 9,043,185 and 4,264,000 shares issued,
at December 31,
1998 and 1997, respectively; 9,027,730 and
4,261,500 shares outstanding at December 31, 1998
and 1997, respectively............................ 90,432 42,640
Common stock, $.01 par value: non-voting: 500,000
shares authorized, issued and outstanding ........ -- 5,000
Additional paid-in capital......................... 58,490,848 14,013,092
Accumulated deficit................................ (12,392,763) (16,913,595)
Less: cost of treasury stock 15,455 and 2,500
shares, respectively.............................. (52,530) (143)
Deferred compensation.............................. (5,592) (9,890)
------------ -----------
Total common stockholders' equity (deficit)........ 46,130,395 (2,862,896)
------------ -----------
Total liabilities, mandatorily redeemable preferred
stock and
common stockholders' equity (deficit)............. $104,422,216 $52,680,119
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
(See Note 1 regarding Basis of Presentation)
For the Years Ended December 31,
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues................................ $73,234,285 $36,652,889 $16,286,280
Cost of revenues (exclusive of
depreciation).......................... 41,091,313 21,812,960 8,639,578
----------- ----------- -----------
Gross profit........................... 32,142,972 14,839,929 7,646,702
Selling, general and
administrative expenses (selling,
general and administrative expenses to
related parties are $1,020,702,
$258,665, and $2,196,094,
respectively).......................... 21,583,716 8,909,475 7,727,072
Amortization expense.................... 1,731,372 900,696 27,055
----------- ----------- -----------
Income (loss) from operations.......... 8,827,884 5,029,758 (107,425)
Interest income......................... 193,985 113,204 --
Interest expense-related party.......... (569,538) (1,999,009) (100,733)
Interest expense........................ (382,953) (440,453) --
Other expense-related party............. -- (301,841) --
Other income (expense).................. 3,537 4,757 (200,322)
----------- ----------- -----------
Income (loss) before income taxes...... 8,072,915 2,406,416 (408,480)
Income tax (expense) benefit............ (3,552,083) (1,181,484) 87,533
----------- ----------- -----------
Net income (loss)...................... $ 4,520,832 $ 1,224,932 $ (320,947)
=========== =========== ===========
Earnings (loss) per share of common
stock
Basic.................................. $ 0.52 $ 0.26 $ (0.07)
=========== =========== ===========
Diluted................................ $ 0.51 $ 0.26 $ (0.07)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY (DEFICIT)
(See Note 1 regarding Basis of Presentation)
For the Years Ended December 31, 1996, 1997 and 1998.
<TABLE>
<CAPTION>
Common Stock Additional
------------------- Paid-in Treasury Retained Earnings/ Deferred
Shares Amount Capital Stock Accumulated (Deficit) Compensation Total
---------- ------- ----------- ----------- --------------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1995.................... 2,000 $ 2,000 $ 217,000 $ -- $ 370,820 $ -- $ 589,820
Stock split effective
December 6, 1996........ 4,298,000 41,000 (41,000) -- -- -- --
Merger of TelAc, Inc and
Telephone Access, Inc... -- -- 11,170,882 -- -- -- 11,170,882
Assumption of net
liabilities by Former
Principal
Stockholders............ -- -- 936,500 -- -- -- 936,500
Sale of common stock to
management.............. 130,000 1,300 6,110 -- -- -- 7,410
Sale of common stock to
Investors............... 3,500,000 35,000 277,000 -- -- -- 312,000
Purchase of common
shares.................. -- -- -- (18,000,000) -- -- (18,000,000)
Retirement of treasury
stock................... (3,500,000) (35,000) (147,420) 18,000,000 (17,817,580) -- --
Revocation of S
Corporation status...... -- -- 370,820 -- (370,820) -- --
Net loss for the year
ended December 31,
1996.................... -- -- -- -- (320,947) -- (320,947)
---------- ------- ----------- ----------- ------------ ------- -----------
Balance, December 31,
1996.................... 4,430,000 44,300 12,789,892 -- (18,138,527) -- (5,304,335)
Sale of common stock to
management.............. 234,000 2,340 25,588 -- -- (9,890) 18,038
Purchase of TMS by TLM
(Note 1)................ -- -- 164,500 -- -- -- 164,500
Purchase of common
stock................... -- -- -- (143) -- -- (143)
Merger of TLM and Access
Worldwide (Note 1)...... 100,000 1,000 1,033,112 -- -- -- 1,034,112
Net income for the year
ended December 31,
1997.................... -- -- -- -- 1,224,932 -- 1,224,932
---------- ------- ----------- ----------- ------------ ------- -----------
Balance, December 31,
1997.................... 4,764,000 47,640 $14,013,092 (143) (16,913,595) (9,890) (2,862,896)
Common stock issued at
Offering................ 4,000,000 40,000 41,335,532 -- -- -- 41,375,532
Convertible promissory
note converted to common
stock................... 208,334 2,083 2,497,917 -- -- -- 2,500,000
Contingent payments made
in the form of common
stock................... 70,851 709 694,347 -- -- -- 695,056
Purchase of common
stock................... -- -- -- (602,812) -- -- (602,812)
Issuance of treasury
stock................... -- -- (50,040) 550,425 -- -- 500,385
Amortization of deferred
compensation............ -- -- -- -- -- 4,298 4,298
Net income for the year
ended December 31,1998.. -- -- -- -- 4,520,832 -- 4,520,832
---------- ------- ----------- ----------- ------------ ------- -----------
Balance, December 31,
1998.................... 9,043,185 $90,432 $58,490,848 $ (52,530) $(12,392,763) $(5,592) $46,130,395
========== ======= =========== =========== ============ ======= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
(See Note 1 regarding Basis of Presentation)
For the Years Ended December 31,
<TABLE>
<CAPTION>
1998 1997 1996
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss)................... $ 4,520,832 $ 1,224,932 $ (320,947)
Adjustments to reconcile net income
(loss)
to net cash provided by operating
activities:
Depreciation and amortization....... 3,131,788 1,330,159 184,056
Deferred tax provision.............. (740,979) 92,115 (87,533)
Interest expense on mandatorily
redeemable
preferred stock.................... 46,142 288,000 --
Loss on disposition of property..... -- -- 200,238
Changes in operating assets and
liabilities,
excluding effects from
acquisitions:
Accounts receivable................ (12,105,461) (2,088,329) (2,351,438)
Due to related parties and
affiliates......................... (407,411) 1,603,990 288,438
Other assets........................ (1,830,700) (865,375) 186,596
Accounts payable and accrued
expenses........................... 11,459,644 315,949 2,573,539
Deferred revenue.................... 1,467,635 496,244 --
----------- ------------ ------------
Net cash provided by operating
activities........................ 5,541,490 2,397,685 672,949
----------- ------------ ------------
Cash flows from investing activities:
Additions to property and equipment,
net................................ (5,672,131) (1,545,518) (1,045,073)
(Funding) use of letter of credit... -- 15,000,000 (15,000,000)
Business acquisitions, net of cash
acquired........................... (36,904,338) (20,238,495) (60,000)
----------- ------------ ------------
Net cash used in investing
activities........................ (42,576,469) (6,784,013) (16,105,073)
----------- ------------ ------------
Cash flows from financing activities:
Deferred stock issuance and debt
issuance costs..................... (2,128,191) (892,211) --
Payments on capital lease........... (74,109) (220,494) (6,186)
Proceeds from notes payable......... 11,000,000 15,446,248 13,021,000
Distribution to former principal
stockholders....................... -- -- (175,000)
Proceeds from sale of common and
preferred stock.................... 45,135,802 1,999,500 2,119,410
Net borrowings under line of credit
facility........................... 19,986,952 5,810,000 --
Repayment of related party debt..... (36,385,155) (16,042,248) --
Purchase of common shares........... (602,812) (143) --
----------- ------------ ------------
Net cash provided by financing
activities........................ 36,932,487 6,100,652 14,959,224
----------- ------------ ------------
Net (decrease) increase in cash.... (102,492) 1,714,324 (472,900)
Cash and cash equivalents, beginning
of period.......................... 2,014,711 300,387 773,287
----------- ------------ ------------
Cash and cash equivalents, end of
period............................. $ 1,912,219 $ 2,014,711 $ 300,387
=========== ============ ============
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest........................... $ 1,903,931 $ 651,822 $ 8,335
=========== ============ ============
Income taxes....................... $ 2,438,299 $ 1,296,000 $ --
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
1. Business Description and Significant Accounting Policies
Business Description
Access Worldwide Communications, Inc. ("Access Worldwide" or the "Company"),
formerly known as CulturalAccessWorldwide, Inc. and /or CulturalAccess, is an
outsourced marketing services company that assists more than 100 clients in
the pharmaceutical, telecommunications, financial services and consumer
products industries. The Company designs and delivers innovative, data-driven
sales and marketing solutions that maximize clients' sales and profits. The
Company has particular expertise in reaching key pharmaceutical audiences--
physicians, pharmacists and patients--and targeted consumer groups. Access
Worldwide's resources include proprietary databases of targeted consumers,
physicians and pharmacists; strategic planning and market research services;
medical education; medical meetings management; medical publications; inbound
and outbound teleservices in 15 different languages; ETMS; and DEA approved
drug sample fulfillment and direct mail capabilities. Access Worldwide has
over 1,400 employees and representatives in offices throughout the United
States.
Basis of Presentation
The financial statements present the financial position and results of
operations of Access Worldwide Communications, Inc. and its subsidiaries.
Access Worldwide (formerly Telephone Access, Inc.), was incorporated in
Delaware in 1983, and operates in Arlington, Virginia. Access Worldwide was
formed and was wholly owned by several individuals (the "Former Principal
Stockholders"). In addition, certain of the Former Principal Stockholders
formed and owned the majority of another corporation, TelAc, Inc., which
operated in Dallas, Texas. On December 6, 1996, the Company and TelAc, Inc.
were merged. The merger was effected through a one-for-one share exchange,
with the stockholders of TelAc, Inc. receiving one Access Worldwide share for
every TelAc, Inc. share. The fair value of the consideration paid was based on
the fair value of shares of Access Worldwide, which was determined based on
the price being paid by third parties, at the time, to acquire shares of
Access Worldwide. The merger was accounted for using the purchase method of
accounting. TelAc, Inc. is included on a combined basis with the Company from
the date of its inception (July 1995) through December 6, 1996 due to common
ownership, common management and the integrated nature of business
activities/operations. All intercompany operations have been eliminated in the
Company's combined financial statements.
On December 6, 1996, the Company was recapitalized. The recapitalization
(the "Recapitalization") was effected by (i) the Company's issuance of common
and preferred shares to a group of investors, previously unaffiliated with the
Company (the "Investors"), for $2,100,000; (ii) the Company's issuance of
common shares to the then current management of the Company for $7,410; (iii)
the Company's borrowing of $13,000,000 from the Investors; and (iv) the
purchase and cancellation of common shares from the individuals owning common
shares before the Recapitalization (the Former Principal Stockholders) for
$18,000,000. After the Recapitalization, the Former Principal Stockholders of
the Company retained 18% of the outstanding common shares. See Note 2 for a
more complete description of these transactions.
On January 1, 1997, TLM Holdings Corp. ("TLM"), an inactive corporation with
no assets, liabilities or operations, was formed by the Investors to purchase,
through a subsidiary, certain assets and assume certain liabilities of
TeleManagement Services, Inc. ("TMS") for $7.8 million. In connection with the
initial capitalization of TLM, the Investors purchased (a) 3,500,000 shares of
common stock of TLM for an aggregate purchase price of $199,500 and (b) 18,000
shares of mandatorily redeemable preferred stock of TLM for an aggregate
purchase price of $1,800,000. Since Access Worldwide and TLM were commonly
controlled companies effective with the acquisition on January 1, 1997, the
financial statements as of and for the year ended December 31, 1997 are
presented on a combined basis. All intercompany transactions and balances have
been eliminated.
24
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
1. Business Description And Significant Accounting Policies -- (Continued)
On October 21, 1997, the Investors merged their interests in Access
Worldwide and TLM. As part of the merger, the Investors made a capital
contribution to the Company of the 3,500,000 shares of TLM common stock which
the Investors held. In addition, the 18,000 shares of TLM mandatorily
redeemable preferred stock held by the Investors were converted into 18,000
shares of Access Worldwide mandatorily redeemable preferred stock. The
remaining TLM stockholders received a one-for-one share exchange of 100,000
shares of TLM voting common stock for Access Worldwide voting common stock.
The merger of commonly controlled interests, was accounted for using the
historical costs of the respective businesses in a manner similar to a pooling
of interests. The acquisition of the minority interest in TLM was accounted
for using the purchase method.
Based on the merger of commonly controlled interests, the Company's
financial statements as of December 31, 1998 have been consolidated and all
intercompany transactions and balances have been eliminated.
Cash and Cash Equivalents
All highly liquid investments with maturities of three months or less when
purchased are considered cash and cash equivalents.
Deferred Revenues and Issuance Costs
Deferred revenues represent customer deposits for services that have been
contracted for but have not been fully performed. Deferred issuance costs are
costs incurred directly related to the Company's initial public offering,
which occurred on February 13, 1998, and were netted against the proceeds
received.
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets ranging from three to seven years. Leasehold
improvements are amortized over the remaining term of the facilities' lease.
When assets are retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain
or loss is recognized in the period. Expenditures for maintenance and repairs
are expensed as incurred, while expenditures for major renewals that extends
the useful lives are capitalized.
Computer Software
The Company has developed certain computer software and technically derived
procedures intended to maximize the quality and efficiency of its services.
Costs of purchased internal-use computer and telephone software are
capitalized and costs of internally developed internal-use computer software
are expensed as incurred.
Intangible Assets
Assets and liabilities acquired in connection with business combinations are
accounted for under the purchase method of accounting and are recorded at
their respective fair values. The excess of the purchase price over the fair
value of net assets acquired consists of noncompete agreements, customer
lists, assembled workforce and goodwill (the intangible assets). The
intangible assets are amortized on a straight-line basis over the estimated
useful lives of the assets, which range from three to thirty-five years. The
Company reviews the recoverability of its long-lived assets, including
intangible assets, when events or changes in circumstances occur that indicate
that the carrying value of the assets may not be recoverable in accordance
with Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of.
25
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
1. Business Description and Significant Accounting Policies -- (Continued)
Treasury Stock
The Company's treasury stock was accounted for using the cost basis method
of accounting.
On September 10, 1998, the Board of Directors approved a 300,000 common
stock buyback program. At December 31, 1998, the Company had 165,000 shares of
common stock left to be repurchased under this program.
Revenue Recognition
Revenues received from database analysis, strategic planning, tele-
sales/services, direct mail, sales force support systems, sales territory
management and product sampling, fulfillment and medical education services
are recognized when the services are rendered. Revenues received from market
research and contract services are recognized using the percentage of
completion method as services are delivered. Expenses related to marketing and
contract services are recognized on the accrual basis of accounting. Revenues
received from medical education and medical meetings management services are
recognized using the percentage of completion method as milestones are
achieved. Expenses related to medical education and medical meetings
management services are recognized using standard cost accounting. The Company
does not require collateral or other security to support credit sales.
Income Taxes
Beginning August 1, 1994 and through December 7, 1996, the Company elected
to be taxed as an S Corporation for Federal and State income tax purposes. As
a result, the stockholders paid taxes on their respective shares of taxable
income, even if such income was not distributed. Accordingly, no taxes or
income tax provision has been recorded for the period ended December 6, 1996
(see Note 7).
Effective December 7, 1996, the Company discontinued its election to be
treated as an S Corporation and elected to be treated as a C Corporation. The
Company began to account for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes.
Accordingly, deferred tax assets and liabilities are recognized at applicable
income tax rates based upon future tax consequences of temporary differences
between the tax basis and financial reporting basis.
Earnings Per Share
Earnings per share are calculated in accordance with the provisions of
Statement of Financial Accounting Standards No. 128, Earnings Per Share (SFAS
No. 128). SFAS No. 128 requires the Company to report both basic earnings per
share, which is based on the weighted-average number of common shares
outstanding, and diluted earnings per share, which is based on the weighted
average number of common shares outstanding and all potentially dilutive
common shares outstanding.
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123, Accounting for Stock-
based Compensation ("FASB Statement No. 123") encourages, but does not
require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to account for its
stock-based compensation plan using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees ("APB 25") and its related Interpretations.
Use of Estimates
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, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
26
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
1. Business Description and Significant Accounting Policies -- (Continued)
Reclassifications
Certain reclassifications have been made to the December 31, 1997 and 1996
financial statements to conform to the December 31, 1998 presentation.
2. Leveraged Recapitalization
On December 6, 1996, the Company consummated a leveraged Recapitalization
pursuant to the Recapitalization and Investment Agreement (the "Agreement"),
with the Company, the Former Principal Stockholders and the Investors. The
principal elements of the Recapitalization included the following:
. Amendments to the certificate of incorporation to provide that the
authorized capital consists of 1,000,000 shares of $.01 par value
preferred stock of which 18,000 shares shall be designated as
cumulative mandatorily redeemable preferred stock; 19,500,000 shares of
$.01 par value voting common stock; and 500,000 shares of $.01 par
value non-voting common stock.
. The 2,000 shares of voting common stock held by the Former Principal
Stockholders were split at a rate of 2,150 shares for each share held
which resulted in 4,300,000 voting common shares issued and
outstanding.
. The sale of newly issued shares of common stock (3,000,000 shares of
voting stock and 500,000 shares of non-voting stock) and preferred
stock (18,000 shares of 8% cumulative redeemable stock) for cash of
$2,000,000 to the Investors. In addition, the Investors contributed
$112,000 to the Company.
. The borrowing of $13,000,000 in 8% subordinated promissory notes from
the Investors.
. The repurchase and cancellation of 3,500,000 shares of voting common
stock (out of 4,300,000 voting common shares) from the Former Principal
Stockholders for $15,000,000 promissory notes due January 2, 1997 and
$3,000,000 in 6% convertible subordinated notes. The Company
collateralized the promissory notes with an irrevocable letter of
credit and fully funded the letter of credit on December 6, 1996. The
$15,000,000 was paid to the Former Principal Stockholders on January 2,
1997.
3. Purchase Business Combinations
1997
Effective January 1, 1997, the Investors formed an inactive corporation,
TLM, to purchase, through a subsidiary, certain assets and to assume certain
liabilities of TMS. (See Note 1)
Effective October 1, 1997, the Company purchased all the outstanding and
issued shares of Hispanic Market Connections, Inc. (subsequently renamed
Cultural Access Group ("CAG")), a California company. The purchase price was
$1,500,000 in cash, $240,000 in the form of a 6.5% subordinated promissory
note, and specified contingent payments based on certain net revenues and pre-
tax earnings goals over the three full calendar year periods subsequent to the
date of acquisition. The cash portion of this purchase was funded by debt
financing provided by the Investors.
On October 21, 1997, the Investors merged their interests in Access
Worldwide and TLM. The acquisition of the 3% minority interest in TLM was
accounted for using the purchase method of accounting. The fair value of the
consideration paid was based on the fair value of shares of Access Worldwide
at that time.
27
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
3. Purchase Business Combinations -- (Continued)
Effective November 1, 1997, the Company purchased assets and liabilities of
Phoenix Marketing Group, Inc. ("Phoenix"), a New Jersey company. The purchase
price was $10,000,000 in cash (including an assumption of $1,000,000 in debt),
a $2,500,000 redeemable note at 6.0% interest, a $2,500,000 convertible note
at 6.0% interest automatically convertible into 208,334 shares of common stock
at the closing of the Company's initial public offering (see Note 4), and
specified contingent payments based on certain net revenues and pre-tax
earnings goals over the three full calendar year periods subsequent to the
date of acquisition. The cash portion of this purchase was funded by debt
financing provided by the Investors.
1998
Effective October 1, 1998, Access Worldwide acquired all the outstanding
capital stock of A M Medica Communications, Ltd. ("A M Medica"), a New York
company. The purchase price was $22,512,700 in cash, 122,045 shares of the
Company's common stock, and a three year 6.5% subordinated promissory note in
the principal amount of $5,500,000. The purchase price also includes certain
future contingent payments of cash and shares of the Company's common stock
dependent on the achievement of certain financial goals by A M Medica. The
ultimate amount of cash to be paid and the ultimate number of shares of common
stock to be issued cannot be determined until the earn-out periods terminate
and achievement of criteria is established.
These acquisitions were accounted for using the purchase method of
accounting. Accordingly, the purchase price was allocated to assets and
liabilities acquired based on their estimated fair values. The financial
statements reflect the results of the acquisitions from their respective dates
of acquisition.
Information with respect to businesses acquired in purchase transactions is
as follows:
<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Fair value of consideration......................... $ -- $ 1,100,000
Cash paid (net of cash acquired).................... 22,512,700 21,276,183
Stock issued........................................ 500,000 --
Notes issued........................................ 5,500,000 6,540,000
Liabilities assumed................................. 9,794,042 3,992,522
----------- -----------
38,306,742 32,908,705
Fair value of tangible assets acquired.............. 10,140,715 7,513,086
----------- -----------
Cost in excess of fair value of tangible assets
acquired........................................... $28,166,027 $25,395,619
=========== ===========
</TABLE>
Certain purchase agreements require additional payments if certain financial
goals are achieved. Of the aggregated amounts payable under these agreements,
70,851 shares of the Company's common stock, valued at $695,056 and $695,056
in cash was paid during 1998. As of December 31, 1998, the Company accrued
$8,474,698 as additional payments in accordance with the above purchase
agreements.
28
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
3. Purchase Business Combinations -- (Continued)
<TABLE>
<CAPTION>
December 31,
Useful Life ------------------------
In Years 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Goodwill.............................. 35 $69,335,377 $33,758,710
Customer lists........................ 5 2,009,494 1,153,200
Assembled workforce................... 3 1,471,844 721,391
Noncompete agreements................. 7 874,034 1,153,200
----------- -----------
73,690,749 36,786,501
Less: Accumulated amortization........ (2,664,954) (927,751)
----------- -----------
Intangible assets, net................ $71,025,795 $35,858,750
=========== ===========
</TABLE>
The unaudited results of operations on a pro forma basis as if each of the
acquisitions had been made as of the beginning of the year is as follows:
<TABLE>
<CAPTION>
Years Ended December
31,
1998 1997
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues............................................... $92,238,844 $66,579,642
Income from operations................................. 11,708,370 8,024,007
Net income............................................. 5,304,201 1,678,401
Earnings per share of common stock
Basic................................................. $0.61 $0.34
Diluted............................................... $0.59 $0.34
</TABLE>
4. Initial Public Offering
On February 13, 1998, the Company's initial public offering (the "Offering")
of 4,000,000 shares of common stock became effective. The proceeds received
from the initial public offering were used to retire the following long term
debt and associated accrued interest which was outstanding as of December 31,
1997:
<TABLE>
<S> <C>
8% subordinated promissory notes due to the Investors on
December 1, 2006.............................................. $13,021,000
8% subordinated promissory notes due to the Investors on
January 15, 2007 ............................................. 6,500,000
6% convertible subordinated promissory notes due to the Former
Principal Stockholders on December 1, 2000.................... 3,000,000
6% subordinated promissory note due to the former stockholders
of Phoenix.................................................... 2,500,000
8% subordinated promissory note due to the Investors on October
15, 2007 ..................................................... 13,546,000
Uncommitted line of credit facility............................ 1,490,000
Unpaid interest due............................................ 2,032,000
</TABLE>
Also, in conjunction with the Offering, the following occurred: (i) the 6%
convertible subordinated promissory note due to the former stockholders of
Phoenix for $2,500,000 was converted into 208,334 shares of common stock; (ii)
the Company's 36,000 shares of series 1996 preferred stock were converted into
Series 1998 preferred stock with terms as follows: $0.01 par value; 65,000
shares authorized, dividends payable per share in cash and non cash
distributions equal to the product of (x) 8.33 and (y) any per share dividends
and distributions paid on shares of common stock; mandatorily redeemable by
the Company at a price of $100 per share upon any other public offering, a
change in control, or the Company's achievement of net income of $10 million
over any four consecutive quarters; (iii) $2,900,000 of 8% subordinated
promissory notes due to the Investors on December 1, 2006 was converted into
29,000 shares of series 1998 preferred stock; (iv) the Company paid $299,000
in accrued interest on the series 1996 preferred stock and (v) the 500,000
shares of non-voting common stock were converted into 500,000 shares of voting
common stock on a share-for-share basis.
29
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
5. Property and Equipment
Property and equipment are carried at cost less accumulated depreciation and
consist of the following:
<TABLE>
<CAPTION>
December 31,
Useful Life -----------------------
In Years 1998 1997
------------- ----------- ----------
<S> <C> <C> <C>
Furniture and fixtures............... 7 $ 1,640,792 $ 894,793
Telephone and office equipment....... 7 3,353,205 1,103,624
Computer equipment................... 3-5 3,471,321 2,125,299
Leasehold improvements. ............. Life of lease 2,004,692 630,268
----------- ----------
10,470,010 4,753,984
Less: Accumulated depreciation....... (1,904,822) (582,178)
----------- ----------
Property and equipment, net.......... $ 8,565,188 $4,171,806
=========== ==========
</TABLE>
Depreciation expense (including property and equipment held under capital
leases) was $1,248,073, $429,463 and $157,001 for the years ended December 31,
1998, 1997 and 1996, respectively.
6. Revenue From Significant Customer
A substantial portion of the Company's revenue is derived from one customer
which is included in the Consumer Segment (see Note 18). For the years ended
December 31, 1998, 1997 and 1996, revenues from that customer amounted to
approximately 36%, 59% and 96% of revenues, respectively. At December 31,
1998, 1997 and 1996, amounts due from that customer included in accounts
receivable amounted to approximately 21%, 39% and 83% of accounts receivable,
respectively.
7. Income Taxes
As discussed in Note 1, beginning August 1, 1994 and through December 7,
1996, the Company had elected to be treated as an S Corporation for federal
and state income tax purposes. Accordingly, the financial statements do not
reflect a provision for federal income taxes from August 1, 1994 through
December 7, 1996.
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
For the Years Ended December
31,
-------------------------------
1998 1997 1996
---------- ---------- --------
<S> <C> <C> <C>
Current tax expense:
Federal................................. $2,374,376 $1,228,697 $ --
State................................... 436,728 132,435 --
---------- ---------- --------
2,811,104 1,361,132 --
---------- ---------- --------
Deferred tax (benefit) expense:
Federal................................. 631,139 (155,622) (74,604)
State................................... 109,840 (24,026) (12,929)
---------- ---------- --------
740,979 (179,648) (87,533)
---------- ---------- --------
$3,552,083 $1,181,484 $(87,533)
========== ========== ========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
30
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
7. Income Taxes -- (Continued)
Deferred tax assets (liabilities) are comprised of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1997
--------- --------
<S> <C> <C>
Gross deferred tax assets:
Accrued vacations..................................... $ 43,494 $ --
Accrued expenses...................................... 50,665 --
Depreciation.......................................... -- 1,602
Allowance for doubtful accounts....................... 15,902 179,389
Other................................................. -- 47,517
--------- --------
110,061 228,508
--------- --------
Gross deferred tax liabilities:
Amortization of intangible assets..................... (383,565) (48,860)
Depreciation.......................................... (451,208) --
Other................................................. (18,596) --
--------- --------
(853,369) (48,860)
--------- --------
Net deferred tax (liabilities) assets................... $(743,308) $179,648
========= ========
</TABLE>
The effective tax rate was different from the federal statutory rate as
follows:
<TABLE>
<CAPTION>
For the Years
Ended December
31,
----------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory rate.............................................. 34% 34% 34%
Income taxed directly to shareholders....................... -- -- (16)
Meals and entertainment and officers' life insurance........ 1 -- --
State income taxes, net of federal benefit.................. 7 4 4
Preferred stock dividend treated as interest expense........ -- 4 --
Amortization of goodwill.................................... 1 6 --
Other items, net............................................ 1 -- 1
--- ---- ---
44% 48% 23%
=== ==== ===
</TABLE>
31
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
8. Indebtedness
<TABLE>
<CAPTION>
December 31,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Short-term borrowings consist of the following:
Uncommitted line of credit facility in the amount of
$6,000,000, short-term borrowings due to PNC Bank,
on demand, bearing an interest rate at the option
of the Company at (a) the greater of (x) PNC Bank's
prime rate (8.5% at December 31, 1997) or (y) the
Federal funds rate (6.07% at December 31, 1997)
plus 0.5% or (b) the Eurodollar rate (7.94% at
December 31, 1997 at the 30 day rate) plus 2%...... $ -- $ 5,810,000
=========== ===========
Long-term debt consists of the following:
Committed line of credit facility in the amount of
$30,000,000, long-term borrowings due to
NationsBank, due in full on February 27, 2001,
bearing a variable interest rate, depending on
certain financial ratios equal to (a) the LIBOR
rate plus 1.25% to 2.00% or (b) the lead bank's
prime rate plus 0% to 0.375%....................... 25,588,089 --
6% subordinated promissory note due to the former
sole shareholder of AM Medica; principal due in
annual installments of $1,833,333 beginning October
24, 1999 and due in full on October 24, 2001;
interest at 6.5% per year payable semi-annually.... 5,500,000 --
8% subordinated promissory notes due to the
Investors; principal due December 1, 2006; interest
at 8% per year payable quarterly beginning at the
earlier of the date of the closing of the initial
public offering of the Company's common stock or
December 1, 2000................................... -- $13,021,000
8% subordinated promissory notes due to the
Investors; principal due January 15, 2007 or, at
the option of the holder, upon the date of the
closing of the initial public offering of the
Company's common stock............................. -- 1,500,000
6% convertible subordinated promissory note due to
stockholders; principal due in three equal
installments of $60,000 beginning April 1, 1998 and
due in full on April 1, 2000; interest at 6% per
year payable quarterly............................. 120,000 180,000
6% subordinated promissory note due to former
stockholder of TMS; principal due in two annual
installments of $433,333 beginning January 15, 1998
and due in full on January 15, 2000; interest at 6%
per year payable annually.......................... 866,667 1,300,000
6% convertible subordinated promissory notes due to
Former Principal Stockholders; principal (and any
outstanding accrued interest) due at the request of
the payee either: (i) ten days after the closing of
the initial public offering of the Company's common
stock or (ii) December 1, 2000; interest at 6% per
year payable quarterly............................. -- 3,000,000
Amount due to former stockholder of TMS; principal
due in monthly payments of $12,500 plus interest at
8% through February 1, 1999........................ 13,437 155,237
6.5% subordinated promissory note due to the former
sole stockholder of CAG; principal due in quarterly
installments of $20,000 beginning January 1, 1998
and due in full on October 1, 2000; interest at
6.5% per year payable quarterly.................... 160,000 240,000
8% subordinated promissory note due to Investors;
principal due October 15, 2007; interest at 8% per
year payable quarterly beginning the earlier of the
date of the initial public offering of the
Company's common stock or December 1, 2000......... -- 13,046,248
6% convertible subordinated promissory note due to
former stockholders of Phoenix; payable in full on
December 31, 2000 or convertible at the closing of
the initial public offering of the Company's common
stock; interest at 6% per year payable semi-
annually commencing April 1, 1998.................. -- 2,500,000
6% redeemable subordinated promissory note due to
former stockholders of Phoenix; principal payable
at the earlier of the date of the closing of the
initial public offering of the Company's common
stock or December 31, 1998; interest at 6% per year
payable in full at the same date as the principal
payment............................................ -- 2,500,000
Capital leases payable in monthly installments of up
to $2,029 through November 2000.................... 61,812 95,967
Restrictive covenant payable in monthly installments
of $2,942 through August 1999...................... 22,676 53,986
----------- -----------
32,332,681 37,592,438
Less: current portion............................... (2,485,201) (3,273,759)
----------- -----------
$29,847,480 $34,318,679
=========== ===========
</TABLE>
32
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
8. Indebtedness -- (Continued)
The $180,000 6% convertible subordinated promissory note is convertible into
shares of common stock at a price of $15 per share if the net revenues of the
applicable acquired firm's business for the years ending December 31, 1997
through 1999 exceed a specified target amount. The targeted amounts were not
exceeded during 1998 and 1997 and no conversion was effected in either year.
The 6% convertible subordinated promissory note of $2,500,000 automatically
converted into 208,334 shares of common stock upon the closing of the initial
public offering of the Company's common stock. See Note 4.
On January 20, 1998, the Company received a commitment from a bank for a
committed line of credit facility for $30,000,000. The credit agreement
provides for interest at a variable rate, depending on certain financial
ratios, equal to (a) the LIBOR rate plus 1.25% to 2.00% or (b) the lead bank's
prime rate plus 0% to 0.375%. Loans made under the credit facility will be
secured by a pledge of all of ( i ) the Company's interest in the common stock
of its subsidiaries and ( ii ) the assets of the Company and its subsidiaries.
All principal and unpaid interest due on the credit facility is payable in
full on February 27, 2001. The Company is required to pay a loan origination
fee and a quarterly commitment fee, and adhere to certain financial covenants.
As of December 31, 1998, the interest rates on loans made on the credit
facility ranged from 6.431%-7.75%. In addition, the Company was in compliance
with all financial covenants as of December 31, 1998.
Aggregate annual principal maturities for indebtedness are as follows:
<TABLE>
<CAPTION>
Years Ending
December 31,
------------
<S> <C>
1999......................................................... $ 2,485,201
2000......................................................... 2,425,449
2001......................................................... 27,422,031
-----------
$32,332,681
===========
</TABLE>
9. Operating Leases
The Company leased office space and operating equipment under non-cancelable
operating leases with terms ranging from three to ten years and expiring at
various dates through June 2008. Rent expense under operating leases was
$2,081,597, $1,002,223 and $334,651 for the years ended December 31, 1998,
1997 and 1996, respectively.
The Company leased office and warehouse facilities under a long-term
operating lease from a partnership comprised of stockholders and certain
former stockholders expiring November 2007. Rent expense under this agreement
totaled $630,460 and $56,447 for the years ended December 31, 1998 and 1997,
respectively. The Company has receivables from this partnership in the amount
of $4,845 and $16,000 at December 31, 1998 and 1997, respectively.
Aggregate minimum annual rentals under the operating leases as of December
31, 1998 are as follows:
<TABLE>
<S> <C>
1999.......................................................... $ 2,430,989
2000.......................................................... 2,492,001
2001.......................................................... 2,071,064
2002.......................................................... 1,708,102
2003.......................................................... 1,441,908
Thereafter.................................................... 2,372,463
-----------
$12,516,527
===========
</TABLE>
33
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
10. Sales-Type Leases
The Company leased equipment to customers under sales-type leases as defined
in Statement of Financial Accounting Standards No. 13, Accounting for Leases.
The current portion of the net investment in sales-type leases is included in
current other assets and the long-term portion is included in non-current
other assets. The components of the net investment in sales-type leases are as
follows:
<TABLE>
<S> <C>
Minimum rental receivables...................................... $475,127
Less: unearned interest income.................................. (14,333)
--------
Net investment in sales-type leases............................. $460,794
========
</TABLE>
Minimum rental receivables under existing leases as of December 31, 1998
were as follows:
<TABLE>
<S> <C>
1999............................................................. $267,294
2000............................................................. 193,500
--------
Total.......................................................... $460,794
========
</TABLE>
Under these leases, the Company also leases Company developed software and
is obligated to provide maintenance services.
11. Access Worldwide Capital Structure
COMMON STOCK
Prior to the Recapitalization on December 6, 1996 (see Note 2), the
Company's authorized, issued and outstanding capital included 1,000 shares of
$1 par value common stock at July 31, 1994 and December 31, 1994. At December
31, 1995, the Company's authorized capital included 2,000 shares of $1 par
value common stock, of which 1,670 shares were issued and outstanding and 330
shares were subscribed.
Subsequent to the Recapitalization on December 6, 1996 (see Note 2), the
Company's authorized capital includes 20,000,000 shares of common stock, $.01
par value per share, of which 19,500,000 are voting and 500,000 are non-
voting. Each share of non-voting common stock was convertible at the option of
the holder into a share of voting common stock at the rate of one share of
voting common stock for each share of non-voting common stock. The 500,000
non-voting shares were issued to the Investors as part of the Recapitalization
and converted to voting shares at the closing of the Offering.
34
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
11. Access Worldwide Capital Structure-- (Continued)
EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------
Income (loss) Shares Per Share
(Numerator) (Denominator) Amount
------------- ------------- ---------
<S> <C> <C> <C>
1998
Basic................................ $4,520,832 8,645,076 $ 0.52
Effect of dilutive securities:
Stock options...................... -- 75,802 --
Earnout contingency................ -- 159,755 --
---------- --------- ------
Earnings per share of common stock--
diluted............................. $4,520,832 8,880,633 $ 0.51
========== ========= ======
1997
Basic................................ $1,224,932 4,762,333 $ 0.26
Effect of dilutive securities:
Stock options...................... -- 67,098 --
Convertible debt................... 19,375 43,403 --
---------- --------- ------
Earnings per share of common stock--
diluted............................. $1,244,307 4,872,834 $ 0.26
========== ========= ======
1996
Earnings per share common stock
Basic and diluted.................... $ (320,947) 4,321,667 $(0.07)
========== ========= ======
</TABLE>
MANDATORILY REDEEMABLE PREFERRED STOCK
Subsequent to the Recapitalization (see Note 2), Access Worldwide had the
authority to issue 1,000,000 shares of preferred stock, $.01 par value per
share.
The first series of preferred stock designated in 1996 by Access Worldwide
is 18,000 shares of non-voting cumulative mandatorily redeemable preferred
stock, $.01 par value ("series 1996"). The holders of this stock were entitled
to receive dividends in cash, when and as declared by the Board of Directors,
at a rate of $8.00 per share per year payable quarterly commencing on March
31, 1997. Dividends were cumulative on these shares (See Note 4).
The second series of preferred stock designated in 1997 by Access Worldwide
was 18,000 shares of non-voting 8% cumulative mandatorily redeemable preferred
stock, $.01 par value ("Series 1997").
See Note 4 which describes the conversion of both series of preferred stock
into a new series upon the completion of the Offering of the Company's common
stock.
12. TLM Capital Structure
TLM's authorized capital includes 20,000,000 voting shares of common stock,
$.01 par value per share. Prior to the merger of Access Worldwide and TLM on
October 21, 1997, 3,600,000 shares were authorized, issued, and outstanding.
These shares were converted into Access Worldwide shares upon the merger and
3,500,000 shares were contributed back to the Company (See Note 1).
35
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
12. TLM Capital Structure -- (Continued)
MANDATORY REDEEMABLE PREFERRED STOCK
TLM had the authority to issue 1,000,000 shares of preferred stock, $.01 par
value per share.
The first series of preferred stock designated in 1996 by TLM was 18,000
shares of non-voting, cumulative mandatorily redeemable preferred stock, $.01
par value. TLM had the right to redeem all or part of the outstanding shares
of the 8% cumulative preferred stock at any time at a price of $100 per share
plus all accrued dividends. Prior to the merger of Access Worldwide and TLM on
October 21, 1997, 18,000 shares were authorized, issued and outstanding. These
shares were converted into Access Worldwide series 1997 preferred stock upon
the merger. See Note 1 and Note 4.
13. Stock Option Plan
Effective May 1, 1997, the Company adopted the 1997 Stock Option Plan ("the
Plan") which is administered by the Compensation Committee of the Board of
Directors of the Company. The aggregate maximum number of shares of common
stock available for award under the Plan is 800,000. The exercise price of
each option must equal or exceed the fair market value of the Company's stock
on the date of the grant. An option's maximum term is 10 years. Vesting terms
are determined by the Compensation Committee at the time of grant. The Plan
terminates effective May 1, 2007.
The Company applies APB 25 and related Interpretations in accounting for the
Plan. Accordingly, no compensation cost has been recognized for options
granted under the Plan. Had compensation cost for the Plan been determined
based on the fair value at the grant dates for awards under the Plan
consistent with the method of FASB Statement No. 123, excluding options with
performance conditions, the Company's net income and earnings per share would
have been reduced to the pro forma amounts of:
<TABLE>
<CAPTION>
Years Ended
December 31,
1998 1997
---------- ----------
<S> <C> <C>
Net income
As reported.......................................... $4,520,832 $1,224,932
Pro forma............................................ 3,942,821 1,218,877
Earnings per share
As reported
Basic.............................................. $ 0.52 $ 0.26
Diluted............................................ $ 0.51 $ 0.26
Pro forma
Basic.............................................. $ 0.46 $ 0.26
Diluted............................................ $ 0.44 $ 0.26
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions used for
grants in the year ended December 31, 1998: dividend yield of 0%; expected
volatility of 80%; risk-free interest rate at a weighted average of 5.25%;
expected option term of 5 years; and nominal option term of 10 years.
36
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
13. Stock Option Plan -- (Continued)
A summary of the status of the Plan, excluding options with performance
conditions, as of December 31, 1998 and 1997 and changes during the years then
ended is presented below.
<TABLE>
<CAPTION>
1998 1997
--------------------- -----------------
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Outstanding at beginning of year.. 185,000 $6.53 -- --
Granted........................... 597,250 (1) 9.00(1) 185,000 $6.53
Exercised......................... -- -- -- --
Forfeited......................... (18,800)(1) 7.70(1) -- --
------- ----- ------- -----
Outstanding at end of year........ 763,450 $8.43 185,000 $6.53
======= ===== ======= =====
Options exercisable at year-end... 125,640 --
======= ======= =====
Weighted-average fair value of
options granted during the year.. $6.08 $1.56
</TABLE>
- --------
(1) Includes 6,100 shares subject to options granted in which the exercise
price was contingent upon the initial public offering that were forfeited
during fiscal 1998.
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ----------------------------------------- -----------------------------------
Weighted-
Average Weighted Weighted-
Range of Remaining Average Average
Exercise Number of Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
- ------------- ----------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$ 0.25-$ 7.99 409,000 9.46 years $ 5.86 26,800 $ 5.09
$ 8.00-$10.99 43,050 9.26 $ 8.15 4,460 $ 8.00
$11.00-$12.00 311,400 8.80 $11.86 94,380 $12.00
- ------------- ------- ---------- ------ ------- ------
$ 0.25-$12.00 763,450 9.18 years $ 8.43 125,640 $10.38
============= ======= ========== ====== ======= ======
</TABLE>
14. Related Party Transactions
The Company paid consulting fees to a company owned by a stockholder's
brother totaling $216,432 and $155,799 for the years ended December 31, 1997
and 1996, respectively.
The Company paid management fees of $1,175,000 to a partnership related by
common interest during the year ended December 31, 1996.
For the year ended December 31, 1996, the Company paid professional fees and
equipment rental fees of $342,000 and $462,662, respectively, to companies
owned by Former Principal Stockholders.
For the year ended December 31, 1998 and 1997, the Company paid payroll
processing fees of $359,663 and $215,674, respectively, to an affiliated
company.
The Company paid a $750,000 fee to the Investors for their assistance in
effecting the initial public offering of the Company's common stock,
contingent upon the occurrence of the Offering of the Company. This fee was
charged against the proceeds of the Company's Offering (see Note 4).
37
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
14. Related Party Transactions -- (Continued)
The Company subleases a portion of its leased office space to a stockholder-
controlled corporation on a month-to-month basis for $13,200 for the year
ended December 31, 1998. There were no amounts due from the stockholder-
controlled corporation at December 31, 1998.
The Company paid $15,400 in consulting fees to a member of the Board of
Directors for services rendered during 1998.
15. Defined Contribution Plans
The Company has a defined contribution employee benefit plan which covers
substantially all employees of a specific subsidiary. The Company may make
discretionary contributions to the plan. During 1998, $184,754 was contributed
to the plan. No amounts were contributed to the plan for the years ended
December 31, 1997 and 1996.
The Company also sponsors a defined contribution Profit Sharing Plan
covering full-time employees of a specific subsidiary. Contributions are made
at the discretion of the Company. Plan contributions for the years ended
December 31, 1998 and 1997 totaled $322,862 and $15,826, respectively. No
contributions were made for the year ended December 31, 1996.
16. Commitments and Contingencies
EMPLOYMENT AGREEMENTS
In connection with the acquisitions referred to in Note 3, the Company has
entered into employment agreements with management employees, certain of whom
are stockholders of the Company, which expire at various times through 2001.
The employment agreements have terms of four years and require annual payments
of $2,985,000 with bonus amounts of up to $654,500 per year.
CONTINGENT CONSIDERATION IN BUSINESS ACQUISITIONS
In connection with the acquisitions referred to in Notes 1 and 3, the
Company has entered into contractual arrangements whereby shares of Company
common stock and cash may be issued to former owners of acquired businesses
upon attainment of specified financial criteria over three-five years as set
forth in the respective agreements. The amount of shares and cash to be issued
cannot be fully determined until the periods expire and the attainment of
criteria is established. If the criteria are attained, but not exceeded, the
amount of shares which could be issued and cash which could be paid subsequent
to December 31, 1998 under all agreements is 1,136,000 shares and $14,871,000,
respectively. If the targets are exceeded by 10%, the amount of shares which
could be issued and cash which could be paid subsequent to December 31, 1998
under all agreements is 1,297,000 shares and $16,358,000, respectively. The
Company accounts for this additional consideration, when the specified
financial criteria are achieved and it is probable it will be paid, as
additional purchase price for the related acquisition.
17. Fair Value of Financial Instruments
The carrying amount of accounts receivable, other assets, accounts payable,
accrued expenses, capital lease obligations, amount due under line of credit
facility and deferred revenue approximate fair value.
The fair value of the Company's long-term debt is determined by calculating
the present value of expected future cash outlays associated with the debt
instruments. The discount rate used is equivalent to the current rate offered
to the Company for debt of the same maturities at December 31, 1998. The fair
value of the Company's long-term indebtedness approximates the carrying value.
38
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
18. Segments
In accordance with Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information, the
Company's reportable segments are strategic business units that offer
different products and services to different industries throughout the United
States.
The Company's reportable segments are as follows:
-- Pharmaceutical Marketing Service Segment ("Pharmaceutical")--provides
outsourced services to the pharmaceutical industry.
-- Consumer and Business Services Segment ("Consumer")--provides consumer
and multilingual tele-marketing services to the telecommunications and
financial services industry.
--Other Segment--provides quantitative and qualitative research to various
corporations worldwide.
The Pharmaceutical Segment consists of three business units: TMS
Professional Markets Group, Phoenix Marketing Group and A M Medica.
The Company's accounting policies for these segments are the same as those
described in the summary of Significant Accounting Policies, except that
income tax expense is not allocated to each segment. In addition, Access
Worldwide evaluates the performance of its segments and allocates resources
based on gross margin, earnings before interest and taxes ("EBIT") and net
income/loss. There are no intersegment revenues.
The table below presents information about net income/loss and segments used
by the chief operating decision-maker of Access Worldwide as of and for the
years ended December 31, 1998, 1997 and 1996:
1998:
<TABLE>
<CAPTION>
Segment
Pharmaceutical Consumer Other Total Reconciliation Total
-------------- ----------- ---------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $39,747,370 $30,032,901 $3,450,953 $73,231,224 $ 3,061 $ 73,234,285
Gross profit............ 17,830,837 12,378,692 1,930,382 32,139,911 3,061 32,142,972
EBIT.................... 7,217,351 4,738,536 234,557 12,190,444 (3,362,560) 8,827,884
Depreciation expense.... 678,511 507,838 36,029 1,222,378 25,695 1,248,073
Amortization expense.... 1,308,666 338,743 83,964 1,731,373 152,342 1,883,715
Total assets............ 79,479,981 22,203,576 2,586,517 104,270,074 152,142 104,422,216
1997:
Revenues................ $12,348,689 $23,526,859 $ 777,341 $36,652,889 $ 0 $ 36,652,889
Gross profit............ 5,538,083 8,879,315 422,531 14,839,929 0 14,839,929
EBIT.................... 1,963,230 4,074,220 27,624 6,065,074 (1,035,316) 5,029,758
Depreciation expense.... 152,479 276,087 -- 428,566 897 429,463
Amortization expense.... 539,401 333,307 27,988 900,696 -- 900,696
Total assets............ 31,674,262 18,808,595 2,183,447 52,666,304 13,815 52,680,119
1996:
Revenues................ $ -- $16,286,280 $ -- $16,286,280 $ -- $ 16,286,280
Gross profit............ -- 7,646,702 -- 7,646,702 -- 7,646,702
EBIT.................... -- (107,425) -- (107,425) -- (107,425)
Depreciation expense.... -- 157,001 -- 157,001 -- 157,001
Amortization expense.... -- 27,055 -- 27,055 -- 27,055
Total assets............ -- 29,453,659 -- 29,453,659 -- 29,453,659
</TABLE>
39
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
19. Subsequent Events
Credit Facility
On March 12, 1999, the Company received from a syndicate of financial
institutions (including NationsBank, N.A.) (the "Lenders"), which was arranged
by NationsBanc Montgomery Securities LLC, a revolving credit facility (the
"Credit Facility") of $40,000,000, with a sublimit of $5,000,000 for the
issuance of standby letters of credit and a sublimit of $5,000,000 for
swingline loans, and (ii) a term loan facility of $25,000,000. All of the
foregoing bears interest at formula rates ranging from either (i) the higher
of (a) the Federal Funds Effective Rate plus 0.50% and (b) the prime lending
rate charged by the NationsBank, N.A. from time to time, plus an applicable
margin ranging from 0.0% to 1.0% or (ii) LIBOR, plus an applicable margin
ranging from 1.25% to 2.50%. The Company is required to pay a commitment fee
on the unused portions of the Credit Facility. The Credit Facility is secured
by substantially all of the assets of the Company.
Preferred Stock
As of March 12, 1999, the Company will redeem 25,000 shares of its preferred
stock, Series 1998, at a price of $100 per share.
Acquisition
The Company signed a Memorandum of Understanding on February 17, 1999 to
purchase a medical education company. The Company expects to fund this
acquisition by issuing shares of common stock and by utilizing the existing
Credit Facility.
Stock Options
On February 23, 1999, the Board of Directors approved an amendment to the
Company's stock option plan increasing the number of options which may be
issued under the plan by an additional 500,000 options.
40
<PAGE>
Item 9. Changes In and Disagreements with Accountant's on Accounting and
Financial Disclosures
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information appearing under the captions "Directors and Executive
Officers" in the registrant's definitive proxy statement related to the Annual
Meeting of Stockholders to be held on or about April 27, 1999 is incorporated
by reference.
Item 11. Executive Compensation
The information appearing under the caption "Executive Compensation" in the
registrant's definitive proxy statement relating to the Annual Meeting of
Stockholders to be held on or about April 27, 1999 is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
This information appearing under the caption "Principal and Management
Stockholders" in the registrant's definitive proxy statement relating to the
Annual Meeting of Stockholders to be held on or about April 27, 1999 is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information appearing under the caption "Certain Transactions" in the
registrant's definitive proxy statement relating to the Annual Meeting of
Stockholders to be held on or about April 27, 1999 is incorporated herein by
reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 10-K
(a)(1) Financial Statements.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants....................................... 19
Balance Sheets.......................................................... 20
Statements of Operations................................................ 21
Statements of Changes in Common Stockholders' Equity (Deficit).......... 22
Statements of Cash Flows................................................ 23
Notes to Financial Statements........................................... 24
</TABLE>
(a)(2) Schedules.
Schedule II--Valuation and Qualifying Accounts
41
<PAGE>
Schedule II: Valuation and Qualifying Accounts
Years Ended December 31, 1996, 1997 and 1998
<TABLE>
<CAPTION>
Balance At Balance At
Beginning Charged to End
Of Period Expense Deductions Of Period
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1998:
Allowance for doubtful
accounts...................... $279,935 $(28,428) $(66,706) $184,801
Year ended December 31, 1997
Allowance for doubtful
accounts...................... 182,604 506,202 (408,871) 279,935
Year ended December 31, 1996
Allowance for doubtful
accounts...................... $ 18,000 $164,604 $ -- $182,604
</TABLE>
All other schedules have been omitted because they are not applicable
or are not required under Regulation S-X.
(3) The exhibits required to be filed as part of this Annual Report on Form
10-K are contained in the attached Index to Exhibits.
(b) Reports on Form 8-K.
During the Company's fiscal quarter ended December 31, 1998, the
Company filed:
(i) The Company's Current Report on Form 8-K dated October 24, 1998.
42
<PAGE>
POWER OF ATTORNEY
The Registrant and each person whose signature appears below hereby appoint
John Fitzgerald and Michael Dinkins as attorneys-in-fact with full power of
substitution, severally, to execute in the name and on behalf of the
Registrant and each such person, individually and in each capacity stated
below, one or more amendments to the annual report which amendments may make
such changes in the report as the attorney-in-fact acting in the premises
deems appropriate and to file any such amendment to the report with the
Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: March 24, 1999
Access Worldwide Communications,
Inc.
By /s/ John Fitzgerald
-----------------------------------
John Fitzgerald, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Stephen F. Nagy Chairman of the Board and March 24, 1999
______________________________________ Director
(Stephen F. Nagy)
/s/ John Fitzgerald President and Chief March 24, 1999
______________________________________ Executive Officer and
(John Fitzgerald) Director (principal
executive officer)
/s/ Michael Dinkins Chief Financial Officer March 24, 1999
______________________________________ and Senior Vice President
(Michael Dinkins) (principal financial and
accounting officer)
/s/ Peter D. Bewley Director March 24, 1999
______________________________________
(Peter D. Bewley)
/s/ Liam S. Donohue Director March 24, 1999
______________________________________
(Liam S. Donohue)
/s/ Lee H. Edelstein Director March 24, 1999
______________________________________
(Lee H. Edelstein)
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John H. Foster Director March 24, 1999
______________________________________
(John H. Foster)
/s/ Shawkat Raslan Director March 24, 1999
______________________________________
(Shawkat Raslan)
</TABLE>
44
<PAGE>
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Page
------- ----
<C> <S> <C>
2(a) Agreement and Plan of Merger, dated as of December 6, 1996, by
and between the Company and TelAc, Inc. (incorporated by
reference to Exhibit 2(a) to the Company's Registration
Statement on Form S-1 (Registration No. 333-38845) filed with
the Commission on October 27, 1997).
2(b) Recapitalization and Investment Agreement, dated December 6,
1996, by and among Telephone Access, Inc., the shareholders of
Telephone Access, Inc. Abbingdon Venture Partners Limited
Partnership ("Abbingdon-I"), Abbingdon Venture Partners Limited
Partnership II ("Abbingdon-II") and Abbingdon Venture Partners
Limited Partnership III ("Abbingdon-III") (incorporated by
reference to Exhibit 2(b) to the Company's Registration
Statement on Form S-1 (Registration No. 333-38845) filed with
the Commission on October 27, 1997).
2(c) Agreement of Purchase and Sale, dated as of January 1, 1997, by
and among TeleManagement Services, Inc., Lee H. Edelstein and
TLM Holdings Corp. (incorporated by reference to Exhibit 2(c)
to the Company's Registration Statement on Form S-1
(Registration No. 333-38845) filed with the Commission on
October 27, 1997).
2(d) Agreement of Purchase Sale, dated as of September 1, 1997, by
and among Hispanic Market Connections, Inc., M. Isabel Valdes
and the Company (incorporated by reference to Exhibit 2(d) to
the Company's Registration Statement on Form S-1 (Registration
No. 333-38845) filed with the Commission on October 27, 1997).
2(e) Agreement of Purchase and Sale, dated as of October 1, 1997 by
and among Phoenix Marketing Group, Inc., Douglas Rebak, Joseph
Macaluso and the Company (incorporated by reference to Exhibit
2(e) to the Company's Registration Statement on Form S-1
(Registration No. 333-38845) filed with the Commission on
October 27, 1997).
2(f) Agreement of Purchase and Sale dated as of October 24, 1998, by
and among AM Medica Communications, Ltd., Ann Holmes and the
Company (incorporated by reference to Exhibit 2(a) to the
Company's Current Report on Form 8-K dated October 24, 1998).
3(a) Amended and Restated Certificate of Incorporation of the
Company, as amended to date (incorporated by reference to
Exhibit 3(a) to the Company's Registration Statement on Form S-
1 (Registration No. 333-38845) filed with the Commission on
October 27, 1997).
3(b) By-Laws of the Company (incorporated by reference to Exhibit
3(b) to the Company's Registration Statement on Form S-1
(Registration No. 333-38845) filed with the Commission on
October 27, 1997).
3(c) Certificate of Ownership and Merger of Access Worldwide
Communications, Inc. into the Company.
4(a) The Company's 1997 Stock Option Plan (incorporated by reference
to Exhibit 4 to the Company's Registration Statement on Form S-
1 (Registration No. 333-38845) filed with the Commission on
October 27, 1997).
4(b) Preferred Stock, Series 1998 Agreement by and between the
Company and Abbingdon-I and Abbingdon-II.
10(a) Credit Agreement dated April 9, 1998, by and among the Company,
NationsBank, National Association and the other lenders party
thereto (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998).
10(b) Credit Agreement dated March 12, 1999 by and among the Company,
certain subsidiaries of the Company as guarantors, NationsBank,
N.A., as lender and agent and the other lenders party thereto.
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Page
------- ----
<C> <S> <C>
10(c) 6% Convertible Subordinated Promissory Note of the Company,
dated October 17, 1997, payable to the order of Phoenix
Marketing Group, Inc. (incorporated by reference to Exhibit
10(i) to the Company's Registration Statement on Form S-1
(Registration No. 333-38845) filed with the Commission on
October 27, 1997).
10(d) 6% Redeemable Subordinated Promissory Note of the Company,
dated October 17, 1997, payable to the order of Phoenix
Marketing Group, Inc. (incorporated by reference to
Exhibit 10(j) to the Company's Registration Statement on Form
S-1 (Registration No. 333-38845) filed with the Commission on
October 27, 1997).
10(e) Stock Purchase Agreement, dated December 6, 1996, by and
between the Company and John E. Jordan (incorporated by
reference to Exhibit 10(k) to the Company's Registration
Statement on Form S-1 (Registration No. 333-38845) filed with
the Commission on October 27, 1997).
10(f) Stock Purchase Agreement, dated January 15, 1997, between TLM
Holdings Corp. and Lee H. Edelstein (incorporated by reference
to Exhibit 10(l) to the Company's Registration Statement on
Form S-1 (Registration No. 333-38845) filed with the Commission
on October 27, 1997).
10(g) Stock Purchase Agreement, dated April 1, 1997, by and between
the Company and John Fitzgerald (incorporated by reference to
Exhibit 10(m) to the Company's Registration Statement on Form
S-1 (Registration No. 333-38845) filed with the Commission on
October 27, 1997).
10(h) Employment Agreement dated December 6, 1996, by and between the
Company and John E. Jordan (incorporated by reference to
Exhibit 10(n) to the Company's Registration Statement on Form
S-1 (Registration No. 333-38845) filed with the Commission on
October 27, 1997).
10(i) Employment Agreement, dated January 15, 1997, by and between
TLM Holdings Corp. and Lee Edelstein (incorporated by reference
to Exhibit 10(o) to the Company's Registration Statement on
Form S-1 (Registration No. 333-38845) filed with the Commission
on October 27, 1997).
10(j) Employment Letter Agreement, dated April 1, 1997, by and
between the Company and John Fitzgerald (incorporated by
reference to Exhibit 10(p) to the Company's Registration
Statement on Form S-1 (Registration No. 333-38845) filed with
the Commission on October 27, 1997).
10(k) Employment Agreement, dated August 1, 1997, by and between the
Company and Michael Dinkins (incorporated by reference to
Exhibit 10(q) to the Company's Registration Statement on Form
S-1 (Registration No. 333-38845) filed with the Commission on
October 27, 1997).
10(l) Employment Agreement, dated October 17, 1997, by and between
the Company and Douglas Rebak (incorporated by reference to
Exhibit 10(r) to the Company's Registration Statement on Form
S-1 (Registration No. 333-38845) filed with the Commission on
October 27, 1997).
10(m) Agreement, effective January 1, 1997, by and between the
Company and Sprint/United Management Company, together with
contract orders related thereto (incorporated by reference to
Exhibit 10(s) to the Company's Registration Statement on Form
S-1 (Registration No. 333-38845) filed with the Commission on
October 27, 1997).
10(n) Database Licensee Agreement for the AMA Physician Professional
Data, effective January 1, 1996, between the Company and the
American Medical Association (incorporated by reference to
Exhibit 10(t) to the Company's Registration Statement on Form
S-1 (Registration No. 333-38845) filed with the Commission on
October 27, 1997).
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Page
------- ----
<C> <S> <C>
10(o) 6.5% Subordinated Promissory Note of the Company dated October
24, 1998, payable to the order of Ann Holmes (incorporated by
reference to Exhibit 2(b) to the Company's Current Report on
Form 8-K dated October 24, 1998).
10(p) Employment Agreement dated October 24, 1998 by and between the
Company and Ann Holmes (incorporated by reference to Exhibit 10
to the Company's Current Report on Form 8-K dated October 24,
1998).
10(q) Employment Agreement dated January 15, 1997 by and between TLM
Acquisition Corp. (a subsidiary of the Company) and Mary
Sanchez (incorporated by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998).
10(r) Employment Agreement dated September 24, 1997 by and between
the Company and Isabel Valdes.
21 Subsidiaries of the Company.
22 Powers of Attorney (see Power of Attorney in Form 10-K).
27 Financial Data Schedules.
</TABLE>
47
<PAGE>
Exhibit 3(c)
CERTIFICATE OF OWNERSHIP AND MERGER
OF
ACCESS WORLDWIDE COMMUNICATIONS, INC.
(a Delaware corporation)
INTO
CULTURALACCESSWORLDWIDE, INC.
(a Delaware corporation)
It is hereby certified that:
1. CulturalAccessWorldwide, Inc. (the "Corporation") is a business
corporation of the State of Delaware.
2. The Corporation is the owner of all of the outstanding shares of
the stock of Access Worldwide Communications, Inc., which is also a business
corporation of the State of Delaware.
3. In connection with the merger described in Item 4, the Corporation
hereby changes its name to Access Worldwide Communications, Inc.
4 On October 15, 1998, the Board of Directors of the Corporation
adopted the following resolutions to merge Access Worldwide Communications, Inc.
into the Corporation:
RESOLVED that Access Worldwide Communications, Inc. be merged
into the Corporation, and that all of the estate, property, rights,
privileges, powers and franchises of Access Worldwide Communications,
Inc. be vested in and held and enjoyed by the Corporation as fully and
entirely and without change or diminution as the same were before held
and enjoyed by Access Worldwide Communications, Inc. in its name; and
it is
FURTHER RESOLVED that the Corporation shall assume all of the
obligations of Access Worldwide Communications, Inc.; and it is
FURTHER RESOLVED that the Corporation shall change its name to
Access Worldwide Communications, Inc.; and it is
FURTHER RESOLVED that in connection with the foregoing
resolutions, the Corporation shall cause to be executed and filed
and/or recorded the documents prescribed by the laws of the State of
Delaware and by the laws of any other appropriate jurisdiction and
will cause to
<PAGE>
2
be performed all necessary acts within the State of Delaware and
within any other appropriate jurisdiction.
Dated: October 15, 1998.
CULTURALACCESSWORLDWIDE, INC.
By: /s/ John Fitzgerald
----------------------------
John Fitzgerald
President
<PAGE>
Exhibit 4(b)
ACCESS WORLDWIDE COMMUNICATIONS, INC
2200 Clarendon Boulevard
12th Floor
Arlington, Virginia 22201
March 12, 1999
Abbingdon Venture Partners
Limited Partnership-II
1018 West Ninth Avenue
King of Prussia, Pennsylvania 19406
Abbingdon Venture Partners
Limited Partnership-III
1018 West Ninth Avenue
King of Prussia, Pennsylvania 19406
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of March 12, 1999
(the "Credit Agreement"), by and among Access Worldwide Communications, Inc., a
Delaware corporation (the "Company"), the Subsidiaries of the Company party
thereto, the lenders named therein and such other lenders as may become a party
thereto (the "Lenders"), and NationsBank, N.A., as Agent. In addition, reference
is made to the Certificate of Designation of Preferred Stock, Series 1998 of the
Company filed with the Secretary of State of Delaware on February 10, 1998 (the
"Certificate of Designation"), creating the series of preferred stock, $.01 par
value, of the Company designated as the "Preferred Stock, Series 1998" (the
"Preferred Stock"). Capitalized terms used herein but not otherwise defined
herein shall have the respective meanings accorded such terms in the Credit
Agreement.
<PAGE>
-2-
You, the holders in the aggregate of 100% of the Preferred Stock,
understand that your agreement to waive certain of your rights under the
Certificate of Designation in connection with the redemption of your Preferred
Stock is a condition to the extension of credit to the Company by the Lenders
under the Credit Agreement. You agree to the following terms and conditions with
respect to your rights of redemption of the Preferred Stock:
1. Notwithstanding the provisions set forth in Section 4(a) of the
Certificate of Designation, the Company agrees to repurchase an aggregate of
$2.5 million of the Preferred Stock, on a pro rata basis, at the redemption
price set forth in Section 4(a) of the Certificate of Designation, within five
(5) business days after the Closing Date.
2. Notwithstanding the provisions set forth in Section (4)(a)(x) of
the Certificate of Designation, in the event of a required redemption pursuant
to such Section, you agree that 80% of the Net Proceeds of the additional
capital stock issued by the Company shall be used to prepay the Term Loan and
20% of the Net Proceeds shall be used to redeem the Preferred Stock then
outstanding on a pro rata basis, pursuant to the terms of Section 3.3(b) and
Section 8.9 of the Credit Agreement; provided, however, that such redemption of
the Preferred Stock shall only be permitted if, at the time of such redemption,
(A) no Default or Event of Default exists under the Credit Agreement; and (B)
the Consolidated Senior Leverage Ratio does not exceed 2.25 to 1.00, both (I)
after giving effect to such redemption on a Pro Forma Basis; and (II) after
giving effect thereto in the pro forma financial statements of the Company for
the coming fiscal year based on the annual projections provided to the Agent by
the Company pursuant to Section 7.1(b)(iii) of the Credit Agreement.
<PAGE>
-3-
3. Notwithstanding the provisions set forth in Section (4)(a)(z) of
the Certificate of Designation, you agree that a redemption pursuant to such
Section shall only be permitted if, at the time of such redemption, (A) no
Default or Event of Default exists under the Credit Agreement and (B) the
Consolidated Senior Leverage Ratio does not exceed 2.25 to 1.00, both (I) after
giving effect to such redemption on a Pro Forma Basis and (II) after giving
effect thereto in the pro forma financial statements of the Company for the
coming fiscal year based on the annual projections provided to the Agent by the
Company pursuant to Section 7.1(b)(iii) of the Credit Agreement. If at the time
that the Preferred Stock would otherwise be redeemed pursuant to Section 4(a)(z)
of the Certificate of Designation, the Company has failed to comply with the
requirements set forth in the preceding sentence, such redemption may be made
following the next quarter in which the Company is in compliance. For purposes
of clause (B) above, the "Consolidated Senior Leverage Ratio" shall mean the
ratio of (a) Consolidated Funded Debt minus Subordinated Debt to (b)
Consolidated EBITDA for the period of four consecutive fiscal quarters ending as
of such day minus increases in working capital (as defined by GAAP) during such
period.
* * *
<PAGE>
-4-
By signing this letter, you agree to by bound by all of the terms and
conditions set forth herein and understand and agree that the terms and
conditions hereof may not be amended without the written consent of all of the
Lenders.
Very truly yours,
ACCESS WORLDWIDE COMMUNICATIONS, INC.
By: /s/ Michael Dinkins
-----------------------------------
Michael Dinkins
Senior Vice President
Accepted and Agreed To:
ABBINGDON VENTURE PARTNERS
LIMITED PARTNERSHIP-II
By: ABBINGDON-II PARTNERS, its general partner
By: /s/ Stephen F. Nagy
-------------------------------
Name: Stephen F. Nagy
Title: General Partner
ABBINGDON VENTURE PARTNERS
LIMITED PARTNERSHIP-III
By: ABBINGDON-II PARTNERS, its general partner
By: /s/ Stephen F. Nagy
-------------------------------
Name: Stephen F. Nagy
Title: General Partner
<PAGE>
Exhibit 10(b)
CREDIT AGREEMENT
Dated as of March 12, 1999
among
ACCESS WORLDWIDE COMMUNICATIONS, INC.,
as Borrower,
and
Certain Subsidiaries,
as Guarantors,
THE LENDERS NAMED HEREIN
AND
NATIONSBANK, N.A.,
as Agent
TABLE OF CONTENTS
<PAGE>
SECTION 1 DEFINITIONS...................................................... 1
-----------
1.1 Definitions....................................................... 1
-----------
1.2 Computation of Time Periods....................................... 23
---------------------------
1.3 Accounting Terms.................................................. 23
----------------
SECTION 2 CREDIT FACILITIES................................................ 24
-----------------
2.1 Revolving Loans................................................... 24
---------------
2.2 Letter of Credit Subfacility...................................... 26
----------------------------
2.3 Swingline Loan Subfacility........................................ 31
--------------------------
2.4 Term Loan......................................................... 33
---------
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES................... 34
-----------------------------------------------
3.1 Default Rate...................................................... 34
------------
3.2 Extension and Conversion.......................................... 35
------------------------
3.3 Prepayments....................................................... 35
-----------
3.4 Termination and Reduction of Commitments.......................... 36
----------------------------------------
3.5 Fees.............................................................. 36
----
3.6 Capital Adequacy.................................................. 37
----------------
3.7 Inability To Determine Interest Rate.............................. 38
------------------------------------
3.8 Illegality........................................................ 38
----------
3.9 Requirements of Law............................................... 38
-------------------
3.10 Taxes............................................................ 39
-----
3.11 Indemnity........................................................ 41
---------
3.12 Pro Rata Treatment............................................... 42
------------------
3.13 Sharing of Payments.............................................. 43
-------------------
3.14 Payments, Computations, Etc...................................... 43
----------------------------
3.15 Evidence of Debt................................................. 45
----------------
SECTION 4 GUARANTY......................................................... 46
--------
4.1 The Guarantee..................................................... 46
-------------
4.2 Obligations Unconditional......................................... 46
-------------------------
4.3 Reinstatement..................................................... 47
-------------
4.4 Certain Additional Waivers........................................ 48
--------------------------
4.5 Remedies.......................................................... 48
--------
4.6 Rights of Contribution............................................ 48
----------------------
4.7 Continuing Guarantee.............................................. 49
--------------------
SECTION 5 CONDITIONS....................................................... 49
----------
5.1 Conditions to Closing............................................. 49
---------------------
5.2 Conditions to All Extensions of Credit............................ 51
--------------------------------------
SECTION 6 REPRESENTATIONS AND WARRANTIES................................... 52
------------------------------
6.1 Financial Condition............................................... 52
-------------------
6.2 No Changes or Restricted Payments................................. 52
---------------------------------
6.3 Organization; Existence; Compliance with Law...................... 52
--------------------------------------------
6.4 Power; Authorization; Enforceable Obligations..................... 53
---------------------------------------------
6.5 No Legal Bar...................................................... 53
------------
6.6 No Material Litigation............................................ 53
----------------------
i
<PAGE>
6.7 No Default........................................................ 54
----------
6.8 Ownership of Property; Liens...................................... 54
----------------------------
6.9 Intellectual Property............................................. 54
---------------------
6.10 No.Burdensome Restrictions....................................... 54
--------------------------
6.11 Taxes............................................................ 54
-----
6.12 ERISA............................................................ 55
-----
6.13 Governmental Regulations, Etc.................................... 56
-----------------------------
6.14 Subsidiaries..................................................... 56
------------
6.15 Purpose of Extensions of Credit.................................. 57
-------------------------------
6.16 Environmental Matters............................................ 57
---------------------
6.17 Year.2000 Compliance............................................. 58
--------------------
SECTION 7 AFFIRMATIVE COVENANTS............................................ 58
---------------------
7.1 Financial Statements.............................................. 58
--------------------
7.2 Certificates; Other Information................................... 59
-------------------------------
7.3 Notices........................................................... 60
-------
7.4 Payment of Obligations............................................ 61
----------------------
7.5 Conduct of Business and Maintenance of Existence.................. 62
------------------------------------------------
7.6 Maintenance of Property; Insurance................................ 62
----------------------------------
7.7 Inspection of Property; Books and Records; Discussions............ 62
------------------------------------------------------
7.8 Environmental Laws................................................ 62
------------------
7.9 Financial Covenants............................................... 63
-------------------
7.10 Administrative Fees.............................................. 64
-------------------
7.11 Additional Guaranties, Stock Pledges and Collateral.............. 64
---------------------------------------------------
7.12 Ownership of Subsidiaries........................................ 65
-------------------------
7.13 Use.of Proceeds.................................................. 65
---------------
7.14 Interest Rate Protection Agreements.............................. 64
-----------------------------------
7.15 Year.2000 Compatibility.......................................... 65
-----------------------
7.16 Field Examination................................................ 65
-----------------
SECTION 8 NEGATIVE COVENANTS............................................... 65
8.1 Indebtedness...................................................... 66
------------
8.2 Liens............................................................. 67
-----
8.3 Consolidation, Merger, Sale or Purchase of Assets, etc............ 67
------------------------------------------------------
8.4 Advances, Investments and Loans................................... 68
-------------------------------
8.5 Transactions with Affiliates...................................... 69
----------------------------
8.6 Ownership of Equity Interests..................................... 69
-----------------------------
8.7 Fiscal Year....................................................... 69
-----------
8.8 Prepayments of Indebtedness, etc.................................. 69
---------------------------------
8.9 Restricted Payments............................................... 69
-------------------
8.10 Sale.Leasebacks.................................................. 70
---------------
8.11 Limitations on Restricted Actions................................ 70
---------------------------------
8.12 No.Further Negative Pledges...................................... 70
---------------------------
8.13 No.Foreign Subsidiaries.......................................... 71
-----------------------
SECTION 9 EVENTS OF DEFAULT................................................ 71
-----------------
9.1 Events of Default................................................. 71
-----------------
9.2 Acceleration; Remedies............................................ 73
----------------------
ii
<PAGE>
SECTION 10 AGENCY PROVISIONS............................................... 74
-----------------
10.1 Appointment...................................................... 74
-----------
10.2 Delegation of Duties............................................. 75
--------------------
10.3 Exculpatory Provisions........................................... 75
----------------------
10.4 Reliance on Communications....................................... 75
--------------------------
10.5 Notice of Default................................................ 76
-----------------
10.6 Non-Reliance on Agent and Other Lenders.......................... 76
---------------------------------------
10.7 Indemnification.................................................. 77
---------------
10.8 Agent in its Individual Capacity................................. 77
--------------------------------
10.9 Successor Agent.................................................. 77
---------------
SECTION 11 MISCELLANEOUS................................................... 78
-------------
11.1 Notices.......................................................... 78
-------
11.2 Right of Set-Off................................................. 79
----------------
11.3 Benefit of Agreement............................................. 79
--------------------
11.4 No.Waiver; Remedies Cumulative................................... 82
------------------------------
11.5 Payment of Expenses, etc......................................... 82
------------------------
11.6 Amendments, Waivers and Consents................................. 83
--------------------------------
11.7 Counterparts..................................................... 84
------------
11.8 Headings......................................................... 85
--------
11.9 Survival......................................................... 85
--------
11.10 Governing Law; Submission to Jurisdiction; Venue................ 85
------------------------------------------------
11.11 Severability.................................................... 86
------------
11.12 Entirety........................................................ 86
--------
11.13 Binding Effect; Termination..................................... 86
---------------------------
11.14 Confidentiality................................................. 86
---------------
11.15 Source of Funds................................................. 87
---------------
11.16 Conflict........................................................ 87
--------
iii
<PAGE>
SCHEDULES
Schedule 1.1 Form of Subordination Agreement
Schedule 2.1(a) Lenders and Commitments
Schedule 2.1(b)(i) Form of Notice of Borrowing
Schedule 2.1(e) Form of Revolving Note
Schedule 2.2(b) Form of Notice of Request for Letter of Credit
Schedule 2.4(d) Form of Term Note
Schedule 3.2 Form of Notice of Extension/Conversion
Schedule 5.1(g)(v) Form of Officer's Certificate
Schedule 6.6 Description of Legal Proceedings
Schedule 6.8 Existing Liens
Schedule 6.14 Subsidiaries
Schedule 7.2 Form of Officer's Compliance Certificate
Schedule 7.11 Form of Joinder Agreement
Schedule 8.1 Indebtedness
Schedule 8.4 Existing Investments
Schedule 11.1 Lenders and Addresses
Schedule 11.3(b) Form of Assignment and Acceptance
4
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of March 12, 1999 (the "Credit Agreement"),
----------------
is by and among ACCESS WORLDWIDE COMMUNICATIONS, INC., a Delaware corporation
(the "Borrower"), and the Subsidiaries of the Borrower identified on the
--------
signature pages hereto and such other Subsidiaries of the Borrower as may from
time to time become Guarantors hereunder in accordance with the provisions
hereof (the "Guarantors"), the lenders named herein and such other lenders as
----------
may become a party hereto (the "Lenders"), and NATIONSBANK, N.A., as Agent (in
-------
such capacity, the "Agent").
-----
W I T N E S S E T H
WHEREAS, the Borrower has requested that the Lenders provide $65 million
credit facilities for the purposes hereinafter set forth;
WHEREAS, the Lenders have agreed to make the requested credit facility
available to the Borrower on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
-----------
1.1 Definitions.
-----------
As used in this Credit Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:
"Additional Credit Party" means each Person that becomes a Guarantor
-----------------------
after the Closing Date by execution of a Joinder Agreement.
"Agent" shall have the meaning assigned to such term in the heading
-----
hereof, together with any successors or assigns.
"Agent's Fee Letter" means that certain letter agreement, dated as of
------------------
January 20, 1999, between the Agent and the Borrower, as amended, modified,
supplemented or replaced from time to time.
"Agent's Fees" shall have the meaning assigned to such term in Section
------------
3.5(c).
<PAGE>
"Affiliate" means, with respect to any Person, any other Person (i)
---------
directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person or (ii) directly or indirectly
owning or holding five percent (5%) or more of the equity interest in such
Person. For purposes of this definition, "control" when used with respect
to any Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agency Services Address" means NationsBank, N.A., NC1-001-15-04, 101
-----------------------
North Tryon Street, Charlotte, North Carolina 28255, Attn: Agency
Services, or such other address as may be identified by written notice from
the Agent to the Borrower.
"Aggregate Revolving Committed Amount" means the aggregate amount of
------------------------------------
Revolving Commitments in effect from time to time, not to exceed FORTY
MILLION DOLLARS ($40,000,000).
"Applicable Percentage" means for any day, the rate per annum set
---------------------
forth below opposite the applicable Consolidated Leverage Ratio then in
effect, it being understood that the Applicable Percentage for (i) Base
Rate Loans shall be the percentage set forth under the column "Base Rate
Margin", (ii) Eurodollar Loans shall be the percentage set forth under the
column "Eurodollar Margin and Letter of Credit Fee", (iii) the Letter of
Credit Fee shall be the percentage set forth under the column "Eurodollar
Margin and Letter of Credit Fee" and (iv) the Commitment Fee shall be the
percentage set forth under the column "Commitment Fee":
<TABLE>
<CAPTION>
Eurodollar
Margin
Consolidated and
Pricing Leverage Base Rate Letter of Commitment
Level Ratio Margin Credit Fee Fee
----- ----- ------ ---------- ---
<S> <C> <C> <C> <C>
I less than 1.0 0.0% 1.25% 0.25%
II less than 1.0 but greater than 1.5 0.0% 1.50% 0.30%
III less than 1.5 but greater than 2.0 0.375% 1.875% 0.375%
IV less than 2.0 but greater than2.5 0.625% 2.125% 0.50%
V less than 2.5 but greater than 1.0% 2.50% 0.50%
</TABLE>
The Applicable Percentage shall be determined and adjusted quarterly on the
date (each a "Rate Determination Date") five (5) Business Days after the
-----------------------
date by which the annual and quarterly compliance certificates and related
financial statements and information are required in accordance with the
provisions of Sections 7.1(a) and (b) and Section 7.2(b), as appropriate;
provided that:
--------
2
<PAGE>
(i) the initial Applicable Percentages shall be based on Pricing
Level III and shall remain in effect at such Pricing Level until the
first Rate Determination Date to occur after the Closing Date, and
(ii) in the event an annual or quarterly compliance certificate
and related financial statements and information are not delivered
timely to the Agency Services Address by the date required by Sections
7.1(a) and (b) and Section 7.2(b), as appropriate, the Applicable
Percentages shall be based on Pricing Level V until such time as an
appropriate compliance certificate and related financial statements
and information are delivered, whereupon the applicable Pricing Level
shall be adjusted based on the information contained in such
compliance certificate and related financial statements and
information.
Except as provided in clause (ii) above, each Applicable Percentage shall
be effective from a Rate Determination Date until the next such Rate
Determination Date. The Agent shall determine the appropriate Applicable
Percentages in the pricing matrix promptly upon receipt of the quarterly or
annual compliance certificate and related financial information and shall
promptly notify the Borrower and the Lenders of any change thereof. Such
determinations by the Agent shall be conclusive absent manifest error.
Adjustments in the Applicable Percentages shall be effective as to existing
Extensions of Credit as well as new Extensions of Credit made thereafter.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United
---------------
States Code, as amended, modified, succeeded or replaced from time to time.
"Bankruptcy Event" means, with respect to any Person, the occurrence
----------------
of any of the following with respect to such Person: (i) a Governmental
Authority having jurisdiction shall enter a decree or order for relief in
respect of such Person in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of such Person or for any substantial
part of its Property or ordering the winding up or liquidation of its
affairs; or (ii) there shall be commenced against such Person an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or any case, proceeding or other
action for the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of such Person or for any
substantial part of its Property or for the winding up or liquidation of
its affairs, and such involuntary case or other case, proceeding or other
action shall remain undismissed, undischarged or unbonded for a period of
sixty (60) consecutive days; or (iii) such Person shall commence a
voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or consent to the entry of an order for
relief in an involuntary case under any such law, or consent to the
appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of such Person or
for any substantial part of its Property or make any general assignment for
the benefit of creditors; or (iv) such Person shall be unable to, or shall
admit in writing its inability to, pay its debts generally as they become
due.
3
<PAGE>
"Base Rate" means, for any day, the rate per annum (rounded upwards,
---------
if necessary, to the nearest whole multiple of 1/100 of 1%) equal to the
greater of (a) the Federal Funds Rate in effect on such day plus 1/2 of 1%
----
or (b) the Prime Rate in effect on such day. If for any reason the Agent
shall have determined (which determination shall be conclusive absent
manifest error) that it is unable after due inquiry to ascertain the
Federal Funds Rate for any reason, including the inability or failure of
the Agent to obtain sufficient quotations in accordance with the terms
hereof, the Base Rate shall be determined without regard to clause (a) of
the first sentence of this definition until the circumstances giving rise
to such inability no longer exist. Any change in the Base Rate due to a
change in the Prime Rate or the Federal Funds Rate shall be effective on
the effective date of such change in the Prime Rate or the Federal Funds
Rate, respectively.
"Base Rate Loan" means any Loan bearing interest at a rate determined
--------------
by reference to the Base Rate.
"Borrower" means Access Worldwide Communications, Inc., a Delaware
--------
corporation, as referenced in the opening paragraph, its successors and
permitted assigns.
"Business Day" means a day other than a Saturday, Sunday or other day
------------
on which commercial banks in Charlotte, North Carolina, Princeton, New
Jersey or New York, New York are authorized or required by law to close,
except that, when used in connection with a Eurodollar Loan, such day shall
------ ----
also be a day on which dealings between banks are carried on in Dollar
deposits in London, England.
"Capital Expenditures" means, for any period, without duplication, all
--------------------
expenditures (whether paid in cash or other consideration) during such
period that, in accordance with GAAP, are or should be included in
additions to property, plant and equipment or similar items reflected in
the consolidated statement of cash flows for such period; provided, that
--------
Capital Expenditures shall not include, for purposes hereof, expenditures
of proceeds of insurance settlements, condemnation awards and other
settlements in respect of lost, destroyed, damaged or condemned assets,
equipment or other property to the extent such expenditures are made to
replace or repair such lost, destroyed, damaged or condemned assets,
equipment or other property or otherwise to acquire assets or properties
useful in the business of the members of the Consolidated Group.
"Capital Lease" means, as applied to any Person, any lease of any
-------------
Property (whether real, personal or mixed) by that Person as lessee which,
in accordance with GAAP, is or should be accounted for as a capital lease
on the balance sheet of that Person.
"Capital Lease Obligation" means the capital lease obligations
------------------------
relating to a Capital Lease determined in accordance with GAAP.
4
<PAGE>
"Cash Equivalents" means (a) securities issued or directly and fully
----------------
guaranteed or insured by the United States or any agency or instrumentality
thereof (provided that the full faith and credit of the United States is
pledged in support thereof) having maturities of not more than twelve
months from the date of acquisition, (b) Dollar denominated time deposits
and certificates of deposit of (i) any Lender, or (ii) any domestic
commercial bank of recognized standing (y) having capital and surplus in
excess of $500,000,000 and (z) whose short-term commercial paper rating
from S&P is at least A-1 or the equivalent thereof or from Moody's is at
least P-1 or the equivalent thereof (any such bank being an "Approved
--------
Bank"), in each case with maturities of not more than 270 days from the
date of acquisition, (c) commercial paper and variable or fixed rate notes
issued by any Approved Bank (or by the parent company thereof) or any
variable rate notes issued by, or guaranteed by, any domestic corporation
rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the
equivalent thereof) or better by Moody's and maturing within six months of
the date of acquisition, (d) repurchase agreements entered into by a Person
with a bank or trust company (including any of the Lenders) or recognized
securities dealer having capital and surplus in excess of $500,000,000 for
direct obligations issued by or fully guaranteed by the United States in
which such Person shall have a perfected first priority security interest
(subject to no other Liens) and having, on the date of purchase thereof, a
fair market value of at least 100% of the amount of the repurchase
obligations, (e) obligations of any State of the United States or any
political subdivision thereof, the interest with respect to which is exempt
from federal income taxation under Section 103 of the Internal Revenue
Code, having a long term rating of at least AA- or Aa-3 by S&P or Moody's,
respectively, and maturing within three years from the date of acquisition
thereof, (f) Investments in municipal auction preferred stock (i) rated AAA
(or the equivalent thereof) or better by S&P or Aaa (or the equivalent
thereof) or better by Moody's and (ii) with dividends that reset at least
once every 365 days and (g) Investments, classified in accordance with GAAP
as current assets, in money market investment programs registered under the
Investment Company Act of 1940, as amended, which are administered by
reputable financial institutions having capital of at least $100,000,000
and the portfolios of which are limited to Investments of the character
described in the foregoing subdivisions (a) through (f).
"Change of Control" means the occurrence of any of the following
-----------------
events: (i) other than Abbingdon Venture Partners Limited Partnership II
and Abbingdon Venture Partners Limited Partnership III, any Person or two
or more Persons acting in concert shall have acquired beneficial ownership,
directly or indirectly, of, or shall have acquired by contract or
otherwise, or shall have entered into a contract or arrangement that, upon
consummation, will result in its or their acquisition of or control over,
Voting Stock of the Borrower (or other securities convertible into such
Voting Stock) representing 35% or more of the combined voting power of all
Voting Stock of the Borrower, or (ii) during any period of up to 24
consecutive months, commencing after the Closing Date, individuals who at
the beginning of such 24 month period were directors of the Borrower
(together with any new director whose election or nomination for election
by the Borrower's board of directors or whose nomination for election by
the Borrower's shareholders was approved by a vote of at least two-thirds
of the directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election was
previously so approved)
5
<PAGE>
cease for any reason to constitute a majority of the directors of the
Borrower then in office. As used herein, "beneficial ownership" shall have
the meaning provided in Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934.
"Closing Date" means the date hereof.
------------
"Collateral" means all collateral described in and covered by the
----------
Pledge Agreement and the Security Agreement.
"Commitment" means the Revolving Commitment, the LOC Commitment, the
----------
Swingline Commitment and the Term Loan Commitment.
"Commitment Fee" shall have the meaning assigned such term in Section
--------------
3.5(a).
"Commitment Percentage" means the Revolving Commitment Percentage or
---------------------
the Term Loan Commitment Percentage, as appropriate.
"Commitment Period" means the period from and including the Closing
-----------------
Date to but not including the earlier of (i) the Termination Date, or (ii)
the date on which the Commitments terminate in accordance with the
provisions of this Credit Agreement.
"Consolidated Adjusted EBITDA" means for any period for the
----------------------------
Consolidated Group, the sum of Consolidated EBITDA plus lease and rent
----
expense minus all provisions for federal, state or other domestic and
-----
foreign income taxes, in each case on a consolidated basis determined in
accordance with GAAP applied on an consistent basis. Except as otherwise
expressly provided, the applicable period shall be for the four consecutive
fiscal quarters ending as of the date of determination.
"Consolidated EBITDA" means for any period for the Consolidated Group,
-------------------
the sum of Consolidated Net Income plus Consolidated Interest Expense plus
---- ----
all provisions for federal, state or other domestic and foreign income
taxes plus depreciation and amortization less the cash component of all
----
earn-out payments in connection with acquisition transactions, in each case
on a consolidated basis determined in accordance with GAAP applied on a
consistent basis. Except as otherwise expressly provided, the applicable
period shall be for the four consecutive fiscal quarters ending as of the
date of determination.
"Consolidated Fixed Charge Coverage Ratio" means for any period, the
----------------------------------------
ratio of Consolidated Adjusted EBITDA to Consolidated Fixed Charges.
"Consolidated Fixed Charges" means for any period for the Consolidated
--------------------------
Group, the sum of Consolidated Interest Expense plus lease and rental
----
expense plus scheduled maturities of Consolidated Funded Debt paid
----
(including, for purposes hereof, mandatory commitment reductions, sinking
fund payments and the like relating thereto), in each case on a
consolidated basis determined in accordance with GAAP applied on an
consistent
6
<PAGE>
basis. Except as otherwise expressly provided, the applicable period shall
be for the four consecutive fiscal quarters ending as of the date of
determination.
"Consolidated Funded Debt" means Funded Debt of the Consolidated Group
------------------------
determined on a consolidated basis in accordance with GAAP applied on a
consistent basis.
"Consolidated Group" means the Borrower and its consolidated
------------------
Subsidiaries, as determined in accordance with GAAP.
"Consolidated Interest Expense" means for any period for the
-----------------------------
Consolidated Group, all interest expense, including the amortization of
debt discount and premium and the interest component under Capital Leases,
in each case on a consolidated basis determined in accordance with GAAP
applied on a consistent basis. Except as expressly provided otherwise, the
applicable period shall be for the four consecutive quarters ending as of
the date of determination.
"Consolidated Leverage Ratio" means, as of the last day of any fiscal
---------------------------
quarter, the ratio of Consolidated Funded Debt on such day to Consolidated
EBITDA for the period of four consecutive fiscal quarters ending as of such
day.
"Consolidated Net Income" means for any period for the Consolidated
-----------------------
Group, net income on a consolidated basis determined in accordance with
GAAP applied on a consistent basis, but excluding for purposes of
determining the Consolidated Leverage Ratio, the Consolidated Senior
Leverage Ratio and Consolidated Fixed Charge Coverage Ratio, any
extraordinary gains or losses and related tax effects thereon. Except as
expressly provided otherwise, the applicable period shall be for the four
consecutive quarters ending as of the date of determination.
"Consolidated Net Worth" means, as of any date for the Consolidated
----------------------
Group, shareholders' equity or net worth as determined in accordance with
GAAP.
"Consolidated Senior Leverage Ratio" means, as of the last day of any
----------------------------------
fiscal quarter, the ratio of (a) Consolidated Funded Debt on such day minus
-----
Subordinated Debt to (b) Consolidated EBITDA for the period of four
consecutive fiscal quarters ending as of such day.
"Contractual Obligation" means, as to any Person, any provision of any
----------------------
security issued by such Person or of any material agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
Property is bound.
"Credit Documents" means a collective reference to this Credit
----------------
Agreement, the Notes, the LOC Documents, the Pledge Agreement, the Security
Agreement, the Mortgages, each Joinder Agreement, the Agent's Fee Letter,
and all other related
7
<PAGE>
agreements and documents issued or delivered hereunder or thereunder or
pursuant hereto or thereto.
"Credit Party" means any of the Borrower and the Guarantors.
------------
"Default" means any event, act or condition which with notice or lapse
-------
of time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that, at such time,
-----------------
(i) has failed to make an Extension of Credit required pursuant to the
terms of this Credit Agreement, (ii) has failed to pay to the Agent or any
Lender an amount owed by such Lender pursuant to the terms of the Credit
Agreement or any other of the Credit Documents, or (iii) has been deemed
insolvent or has become subject to a bankruptcy or insolvency proceeding or
to a receiver, trustee or similar proceeding.
"Dollars" and "$" means dollars in lawful currency of the United
------- -
States of America.
"Domestic Credit Party" means any Credit Party which is incorporated
---------------------
or organized under the laws of any State of the United States or the
District of Columbia.
"Domestic Subsidiary" means any Subsidiary which is incorporated or
-------------------
organized under the laws of any State of the United States or the District
of Columbia.
"Environmental Laws" means any and all lawful and applicable Federal,
------------------
state, local and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits, concessions, grants, franchises,
licenses, agreements or other governmental restrictions relating to the
environment or to emissions, discharges, releases or threatened releases of
Materials of Environmental Concern into the environment including, without
limitation, ambient air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of Materials of Environmental
Concern.
"Equity Transaction" means, with respect to any member of the
------------------
Consolidated Group, any issuance of shares of its capital stock or other
equity interest, other than an issuance (i) to a member of the Consolidated
Group, (ii) in connection with a conversion of debt securities to equity,
(iii) in connection with exercise by a present or former employee, officer
or director under a stock incentive plan, stock option plan or other
equity-based compensation plan or arrangement or (iv) by the Borrower of
its common stock in connection with an acquisition consummated prior to the
Closing Date or an acquisition permitted by Section 8.3 .
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended, and any successor statute thereto, as interpreted by the rules and
regulations thereunder, all as the same may be in effect from time to time.
References to sections of ERISA shall be construed also to refer to any
successor sections.
8
<PAGE>
"ERISA Affiliate" means an entity which is under common control with
---------------
any Credit Party within the meaning of Section 4001(a)(14) of ERISA, or is
a member of a group which includes the Borrower and which is treated as a
single employer under Sections 414(b) or (c) of the Internal Revenue Code.
"ERISA Event" means (i) with respect to any Plan, the occurrence of a
-----------
Reportable Event or the substantial cessation of operations (within the
meaning of Section 4062(e) of ERISA); (ii) the withdrawal by the Borrower,
any Subsidiary of the Borrower or any ERISA Affiliate from a Multiple
Employer Plan during a plan year in which it was a substantial employer (as
such term is defined in Section 4001(a)(2) of ERISA), or the termination of
a Multiple Employer Plan; (iii) the distribution of a notice of intent to
terminate or the actual termination of a Plan pursuant to Section
4041(a)(2) or 4041A of ERISA; (iv) the institution of proceedings to
terminate or the actual termination of a Plan by the PBGC under Section
4042 of ERISA; (v) any event or condition which would reasonably be
expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan;
(vi) the complete or partial withdrawal of the Borrower, any Subsidiary of
the Borrower or any ERISA Affiliate from a Multiemployer Plan; (vii) the
conditions for imposition of a lien under Section 302(f) of ERISA exist
with respect to any Plan; or (viii) the adoption of an amendment to any
Plan requiring the provision of security to such Plan pursuant to Section
307 of ERISA.
"Eurodollar Loan" means any Loan bearing interest at a rate determined
---------------
by reference to the Eurodollar Rate.
"Eurodollar Rate" means, for the Interest Period for each Eurodollar
---------------
Loan comprising part of the same borrowing (including conversions,
extensions and renewals), a per annum interest rate determined pursuant to
the following formula:
Eurodollar Rate = Interbank Offered Rate
--------------------------------
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means for any day, that percentage
-----------------------------
(expressed as a decimal) which is in effect from time to time under
Regulation D of the Board of Governors of the Federal Reserve System (or
any successor), as such regulation may be amended from time to time or any
successor regulation, as the maximum reserve requirement (including,
without limitation, any basic, supplemental, emergency, special, or
marginal reserves) applicable with respect to Eurocurrency liabilities as
that term is defined in Regulation D (or against any other category of
liabilities that includes deposits by reference to which the interest rate
of Eurodollar Loans is determined), whether or not Lender has any
Eurocurrency liabilities subject to such reserve requirement at that time.
Eurodollar Loans shall be deemed to constitute Eurocurrency liabilities and
as such shall be deemed subject to reserve requirements without benefits of
credits for proration, exceptions or offsets that may
9
<PAGE>
be available from time to time to a Lender. The Eurodollar Rate shall be
adjusted automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Event of Default" means such term as defined in Section 9.1.
----------------
"Extension of Credit" means, as to any Lender, the making of, or
-------------------
participation in, a Loan by such Lender or the issuance or extension of, or
participation in, a Letter of Credit.
"Fees" means all fees payable pursuant to Section 3.5.
----
"Federal Funds Rate" means, for any day, the rate of interest per
------------------
annum (rounded upwards, if necessary, to the nearest whole multiple of
1/100 of 1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such day,
provided that (A) if such day is not a Business Day, the Federal Funds Rate
--------
for such day shall be such rate on such transactions on the next preceding
Business Day and (B) if no such rate is so published on such next preceding
Business Day, the Federal Funds Rate for such day shall be the average rate
quoted to the Agent on such day on such transactions as determined by the
Agent.
"Foreign Subsidiary" means a Subsidiary which is not a Domestic
------------------
Subsidiary.
"Funded Debt" means, with respect to any Person, without duplication,
-----------
(i) all Indebtedness of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes (including
seller notes) or similar instruments, or upon which interest payments are
customarily made, (iii) all purchase money Indebtedness (including for
purposes hereof, indebtedness and obligations described in clauses (iii)
and (iv) of the definition of "Indebtedness") of such Person, including
without limitation the principal portion of all obligations of such Person
under Capital Leases, (iv) all Support Obligations of such Person with
respect to Funded Debt of another Person, (v) the maximum available amount
of all standby letters of credit or acceptances issued or created for the
account of such Person, (vi) all Funded Debt of another Person secured by a
Lien on any Property of such Person, whether or not such Funded Debt has
been assumed, provided that for purposes hereof the amount of such Funded
--------
Debt shall be limited to the greater of (A) the amount of such Funded Debt
as to which there is recourse to such Person and (B) the fair market value
of the property which is subject to the Lien, (vii) the outstanding
attributed principal amount under any securitization transaction, (viii)
the principal balance outstanding under any synthetic lease, tax retention
operating lease, off-balance sheet loan or similar off-balance sheet
financing product to which such Person is a party, where such transaction
is considered borrowed money indebtedness for tax purposes but is
classified as an operating lease in accordance with GAAP and (ix) the
aggregate amount of all earn-out payments actually earned by a seller of
any business or other assets in connection with any
10
<PAGE>
acquisition made before or after the Closing Date and due by such Person to
such seller. The Funded Debt of any Person shall include the Funded Debt of
any partnership or joint venture in which such Person is a general partner
or joint venturer, but only to the extent to which there is recourse to
such Person for the payment of such Funded Debt.
"GAAP" means generally accepted accounting principles in the United
----
States applied on a consistent basis and subject to the terms of Section
1.3 hereof.
"Governmental Authority" means any federal, state, local or foreign
----------------------
court or governmental agency, authority, instrumentality or regulatory
body.
"Guarantor" means each of those other Persons identified as a
---------
"Guarantor" on the signature pages hereto, and each other Person which may
hereafter become a Guarantor by execution of a Joinder Agreement, together
with their successors and permitted assigns.
"Guaranteed Obligations" means, as to each Guarantor, without
----------------------
duplication, (i) all obligations of the Borrower (including interest
accruing after a Bankruptcy Event, regardless of whether such interest is
allowed as a claim under the Bankruptcy Code) to the Lenders and the Agent,
whenever arising, under this Credit Agreement, the Notes or the other
Credit Documents, and (ii) all liabilities and obligations, whenever
arising, owing from the Borrower to any Lender, or any Affiliate of a
Lender, arising under any Hedging Agreement relating to Obligations
hereunder.
"Hedging Agreements" means any interest rate protection agreement or
------------------
foreign currency exchange agreement between the Borrower and any Lender or
any Affiliate of a Lender.
"Indebtedness" of any Person means, without duplication, (i) all
------------
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes (including seller notes) or
similar instruments, or upon which interest payments are customarily made,
(iii) all obligations of such Person under conditional sale or other title
retention agreements relating to Property purchased by such Person (other
than customary reservations or retentions of title under agreements with
suppliers entered into in the ordinary course of business), (iv) all
obligations of such Person issued or assumed as the deferred purchase price
of Property or services purchased by such Person (other than trade debt
incurred in the ordinary course of business and due within six months of
the incurrence thereof) which would appear as liabilities on a balance
sheet of such Person (including, without limitation, any earn-out payments
which have been earned and are owing with respect to any acquisition made
by such Person), (v) all obligations of such Person under take-or-pay or
similar arrangements or under commodities agreements, (vi) all Indebtedness
of others secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien on, or
payable out of the proceeds of production from, Property owned or acquired
by such Person, whether or not the obligations secured thereby have been
assumed, provided that for purposes hereof the amount of such Indebtedness
--------
shall be limited to the greater of (A) the amount of such
11
<PAGE>
Indebtedness as to which there is recourse to such Person and (B) the fair
market value of the property which is subject to the Lien, (vii) all
Support Obligations of such Person, (viii) the principal portion of all
obligations of such Person under Capital Leases, (ix) all obligations of
such Person in respect of interest rate protection agreements, foreign
currency exchange agreements, commodity purchase or option agreements or
other interest or exchange rate or commodity price hedging agreements
(including, but not limited to, the Hedging Agreements), (x) the maximum
amount of all standby letters of credit issued or bankers' acceptances
facilities created for the account of such Person and, without duplication,
all drafts drawn thereunder (to the extent unreimbursed), (xi) all
preferred stock issued by such Person and required by the terms thereof to
be redeemed, or for which mandatory sinking fund payments are due, by a
fixed date, (xii) the outstanding attributed principal amount under any
securitization transaction and (xiii) the principal balance outstanding
under any synthetic lease, tax retention operating lease, off-balance sheet
loan or similar off-balance sheet financing product to which such Person is
a party, where such transaction is considered borrowed money indebtedness
for tax purposes but is classified as an operating lease in accordance with
GAAP. The Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general partner or a
joint venturer, but only to the extent to which there is recourse to such
Person for payment of such Indebtedness.
"Interbank Offered Rate" means, for the Interest Period for each
----------------------
Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal
to the rate of interest, determined by the Agent on the basis of the
offered rates for deposits in Dollars for a period of time corresponding to
such Interest Period (and commencing on the first day of such Interest
Period), appearing on Telerate Page 3750 (or, if, for any reason, Telerate
Page 3750 is not available, the Reuters Screen LIBO Page) as of
approximately 11:00 A.M. (London time) two (2) Business Days before the
first day of such Interest Period. As used herein, "Telerate Page 3750"
means the display designated as page 3750 by Dow Jones Markets, Inc. (or
such other page as may replace such page on that service for the purpose of
displaying the British Bankers Association London interbank offered rates)
and "Reuters Screen LIBO Page" means the display designated as page "LIBO"
on the Reuters Monitor Money Rates Service (or such other page as may
replace the LIBO page on that service for the purpose of displaying London
interbank offered rates of major banks).
"Interest Payment Date" means (i) as to any Base Rate Loan, the last
---------------------
day of each March, June, September and December, the date of repayment of
principal of such Loan and the Termination Date and (ii) as to any
Eurodollar Loan and Swingline Loan, the last day of each Interest Period
for such Loan, the date of repayment of principal of such Loan and on the
Termination Date, and in addition where the applicable Interest Period is
more than three months, then also on the date three months from the
beginning of the Interest Period, and each three months thereafter. If an
Interest Payment Date falls on a date which is not a Business Day, such
Interest Payment Date shall be deemed to be the next succeeding Business
Day.
12
<PAGE>
"Interest Period" means (i) as to any Eurodollar Loan, a period of
---------------
one, two, three or six months' duration, as the Borrower may elect,
commencing in each case on the date of the borrowing (including
conversions, extensions and renewals) and (ii) as to any Swingline Loan, a
period of such duration, not to exceed 30 days, as the Borrower may request
and the Swingline Lender may agree in accordance with the provisions of
Section 2.3(b)(i), commencing in each case, on the date of borrowing;
provided, however, (A) if any Interest Period would end on a day which is
-------- -------
not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day (except that in the case of Eurodollar Loans where
the next succeeding Business Day falls in the next succeeding calendar
month, then on the next preceding Business Day), (B) in the case of Loans
other than those comprising the Term Loan, no Interest Period shall extend
beyond the Termination Date, and in the case of Loans comprising the Term
Loan, no Interest Period shall extend beyond any principal amortization
payment date unless, and to the extent that, the portion of the Term Loan
comprised of Eurodollar Loans expiring prior to the applicable principal
amortization payment date plus the portion of the Term Loan comprised of
Base Rate Loans equals or exceeds the principal amortization payment then
due; and (C) in the case of Eurodollar Loans, where an Interest Period
begins on a day for which there is no numerically corresponding day in the
calendar month in which the Interest Period is to end, such Interest Period
shall end on the last day of such calendar month.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
---------------------
amended, and any successor statute thereto, as interpreted by the rules and
regulations issued thereunder, in each case as in effect from time to time.
References to sections of the Internal Revenue Code shall be construed also
to refer to any successor sections.
"Investment", in any Person, means any loan or advance to such Person,
----------
any purchase or other acquisition of any capital stock, warrants, rights,
options, obligations or other securities of, or equity interest in, such
Person, any capital contribution to such Person or any other investment in
such Person, including, without limitation, any Support Obligation incurred
for the benefit of such Person.
"Issuing Lender" means NationsBank.
--------------
"Issuing Lender Fees" shall have the meaning assigned to such term in
-------------------
Section 3.5(b)(ii).
"Joinder Agreement" means a Joinder Agreement substantially in the
-----------------
form of Schedule 7.11 hereto, executed and delivered by an Additional
-------------
Credit Party in accordance with the provisions of Section 7.11.
"Lenders" means each of the Persons identified as a "Lender" on the
-------
signature pages hereto, and their successors and assigns.
13
<PAGE>
"Letter of Credit" means any standby letter of credit issued by the
----------------
Issuing Lender for the account of the Borrower in accordance with the terms
of Section 2.2.
"Letter of Credit Fee" shall have the meaning assigned such term in
--------------------
Section 3.5(b)(i).
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, security interest, encumbrance, lien (statutory or otherwise),
preference, priority or charge of any kind (including any agreement to give
any of the foregoing, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the
Uniform Commercial Code as adopted and in effect in the relevant
jurisdiction or other similar recording or notice statute, and any lease in
the nature thereof).
"Loan" or "Loans" means the Revolving Loans, Swingline Loans and/or
---- -----
the Term Loan.
"LOC Commitment" means the commitment of the Issuing Lender to issue,
--------------
and to honor payment obligations under, Letters of Credit hereunder and
with respect to each Revolving Lender, the commitment of each Revolving
Lender to purchase participation interests in the Letters of Credit up to
such Revolving Lender's LOC Committed Amount as specified in Schedule
--------
2.1(a), as such amount may be reduced from time to time in accordance with
------
the provisions hereof.
"LOC Committed Amount" means, collectively, the aggregate amount of
--------------------
all of the LOC Commitments of the Revolving Lenders to issue and
participate in Letters of Credit as referenced in Section 2.2(a) and,
individually, the amount of each Revolving Lender's LOC Commitment as
specified in Schedule 2.1(a).
---------------
"LOC Documents" means, with respect to any Letter of Credit, such
-------------
Letter of Credit, any amendments thereto, any documents delivered in
connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in application
or applicable only to such Letter of Credit) governing or providing for (i)
the rights and obligations of the parties concerned or at risk or (ii) any
collateral security for such obligations.
"LOC Obligations" means, at any time, the sum of (i) the maximum
---------------
amount which is, or at any time thereafter may become, available to be
drawn under Letters of Credit then outstanding, assuming compliance with
all requirements for drawings referred to in such Letters of Credit plus
----
(ii) the aggregate amount of all drawings under Letters of Credit honored
by the Issuing Lender but not theretofore reimbursed.
"Material Adverse Effect" means a material adverse effect on (i) the
-----------------------
condition (financial or otherwise), operations, business, assets,
liabilities or prospects of the Consolidated Group taken as a whole, (ii)
the ability of the Credit Parties taken as a whole
14
<PAGE>
to perform any material obligation under the Credit Documents to which it
is a party or (iii) the rights and remedies of the Lenders under the Credit
Documents.
"Materials of Environmental Concern" means any gasoline or petroleum
----------------------------------
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as
such in or under any Environmental Laws, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"Moody's" means Moody's Investors Service, Inc., or any successor or
-------
assignee of the business of such company in the business of rating
securities.
"Mortgages" means those mortgages, deeds of trust, security deeds or
---------
like instruments given to the Agent for the benefit of the Lenders to
secure the Obligations hereunder, as amended and modified.
"Mortgaged Property" means the property which is the subject of a
------------------
Mortgage as referenced therein.
"Multiemployer Plan" means a Plan which is a multiemployer plan as
------------------
defined in Sections 3(37) or 4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan which the Borrower, any
----------------------
Subsidiary of the Borrower or any ERISA Affiliate and at least one employer
other than the Borrower, any Subsidiary of the Borrower or any ERISA
Affiliate are contributing sponsors.
"NationsBank" means NationsBank, N.A. and its successors.
-----------
"Net Proceeds" means gross cash proceeds (including any cash received
------------
by way of deferred payment pursuant to a promissory note, receivable or
otherwise, but only as and when received) received in connection with an
Equity Transaction net of (i) reasonable transaction costs, including
underwriting discounts and commissions and (ii) estimated taxes payable in
connection therewith.
"Non-Excluded Taxes" means such term as is defined in Section 3.10.
------------------
"Note" or "Notes" means any Revolving Note or any Term Note.
---- -----
"Notice of Borrowing" means a written notice of borrowing in
-------------------
substantially the form of Schedule 2.1(b)(i), as required by Section
------------------
2.1(b)(i).
"Notice of Extension/Conversion" means a written notice of extension
------------------------------
or conversion in substantially the form of Schedule 3.2, as required by
------------
Section 3.2.
15
<PAGE>
"Obligations" means, collectively, the Revolving Loans, the Swingline
-----------
Loans, the LOC Obligations and the Term Loan.
"Operating Lease" means, as applied to any Person, any lease
---------------
(including, without limitation, leases which may be terminated by the
lessee at any time) of any Property (whether real, personal or mixed) which
is not a Capital Lease other than any such lease in which that Person is
the lessor.
"Participation Interest" means the purchase by a Lender of a
----------------------
participation in LOC Obligations as provided in Section 2.2(c), in
Swingline Loans as provided in Section 2.3(b)(iii) and in Loans as provided
in Section 3.13.
"PBGC" means the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA and any successor thereof.
"Permitted Investments" means Investments which are either (i) cash
---------------------
and Cash Equivalents; (ii) accounts receivable created, acquired or made in
the ordinary course of business and payable or dischargeable in accordance
with customary trade terms; (iii) Investments consisting of stock,
obligations, securities or other property received in settlement of
accounts receivable (created in the ordinary course of business) from
bankrupt obligors; (iv) Investments existing as of the Closing Date and set
forth in Schedule 8.4, (v) Support Obligations permitted by Section 8.1;
------------
(vi) acquisitions permitted by Section 8.3(c)(ii); (vii) transactions
permitted by Section 8.5, (viii) loans to employees, directors or officers
in connection with the award of convertible bonds or stock under a stock
incentive plan, stock option plan or other equity-based compensation plan
or arrangement in the aggregate not to exceed $250,000 (calculated on the
exercise price for any such shares) in the aggregate at any time
outstanding; (ix) other advances or loans to employees, directors, officers
or agents not to exceed $500,000 in the aggregate at any time outstanding;
(x) advances or loans to customers or suppliers that do not exceed $100,000
in the aggregate at any one time outstanding, (xi) Investments by members
of the Consolidated Group in their Subsidiaries and Affiliates existing on
the Closing Date, (xii) Investments by members of the Consolidated Group in
and to another Credit Party, (xiii) Investments by any member of the
Consolidated Group in any new Foreign Subsidiary formed by such member of
the Consolidated Group, provided that the aggregate amount of all such
Investments during the term of this Credit Agreement shall not exceed
$500,000, and (xiv) other loans, advances and investments of a nature not
contemplated in the foregoing subsections in an amount not to exceed
$500,000 in the aggregate at any time outstanding.
"Permitted Liens" means:
---------------
(i) Liens in favor of the Agent on behalf of the Lenders;
(ii) Liens in favor of a Lender or an Affiliate of a Lender pursuant
to a Hedging Agreement permitted hereunder, but only (A) to the extent
such Liens secure obligations under such agreements permitted under
Section 8.1, (B) to the
16
<PAGE>
extent such Liens are on the same collateral as to which the Lenders
also have a Lien and (C) if such provider and the Lender shall share
pari passu in the collateral subject to such Liens;
---- -----
(iii) Liens (other than Liens created or imposed under ERISA) for
taxes, assessments or governmental charges or levies not yet due or
Liens for taxes being contested in good faith by appropriate
proceedings for which adequate reserves determined in accordance with
GAAP have been established (and as to which the Property subject to
any such Lien is not yet subject to foreclosure, sale or loss on
account thereof);
(iv) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and suppliers and other Liens
imposed by law or pursuant to customary reservations or retentions of
title arising in the ordinary course of business, provided that such
--------
Liens secure only amounts not yet due and payable or, if due and
payable, are unfiled and no other action has been taken to enforce the
same or are being contested in good faith by appropriate proceedings
for which adequate reserves determined in accordance with GAAP have
been established (and as to which the Property subject to any such
Lien is not yet subject to foreclosure, sale or loss on account
thereof);
(v) Liens (other than Liens created or imposed under ERISA)
incurred or deposits made by the Borrower and its Subsidiaries in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, bids,
leases, government contracts, performance and return-of-money bonds
and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(vi) Liens in connection with attachments or judgments
(including judgment or appeal bonds) provided that the judgments
--------
secured shall, within 30 days after the entry thereof, have been
discharged or execution thereof stayed pending appeal, or shall have
been discharged within 30 days after the expiration of any such stay;
(vii) easements, rights-of-way, restrictions (including zoning
restrictions), minor defects or irregularities in title and other
similar charges or encumbrances not, in any material respect,
impairing the use of the encumbered Property for its intended
purposes;
(viii) Liens securing purchase money and sale/leaseback
Indebtedness (including Capital Leases) to the extent permitted under
Section 8.1(c), provided that any such Lien attaches only to the
--------
Property financed or leased and such Lien attaches thereto
concurrently with or within 90 days after the acquisition thereof in
17
<PAGE>
connection with the purchase money transactions and within 30 days
after the closing of any sale/leaseback transaction;
(ix) leases or subleases granted to others not interfering in
any material respect with the business of any member of the
Consolidated Group;
(x) any interest of title of a lessor under, and Liens arising
from UCC financing statements (or equivalent filings, registrations or
agreements in foreign jurisdictions) relating to, leases permitted by
this Credit Agreement;
(xi) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection
with the importation of goods;
(xii) Liens deemed to exist in connection with Investments in
repurchase agreements permitted under Section 8.4;
(xiii) normal and customary rights of setoff upon deposits of
cash in favor of banks or other depository institutions;
(xiv) Liens existing as of the Closing Date and set forth on
Schedule 6.8; provided that (a) no such Lien shall at any time be
------------ --------
extended to or cover any Property other than the Property subject
thereto on the Closing Date and (b) the principal amount of the
Indebtedness secured by such Liens shall not be extended, renewed,
refunded or refinanced;
(xv) and Liens securing Indebtedness permitted pursuant to Section
8.1(h); provided that (a) no such Lien shall at any time be extended
to or cover any Property other than the Property acquired in
connection with such acquisition and (b) such Lien shall at all times
be subordinated to the Liens of the Agent securing the Credit Parties'
obligations hereunder pursuant to a subordination agreement in form
and substance satisfactory to the Agent; and
(xvi) Liens securing equipment Indebtedness assumed in accordance
with the terms of Section 8.1(i).
"Person" means any individual, partnership, joint venture, firm,
------
corporation, limited liability company, association, trust or other
enterprise (whether or not incorporated) or any Governmental Authority.
"Plan" means any employee benefit plan (as defined in Section 3(3) of
----
ERISA) which is covered by ERISA and with respect to which the Borrower,
any Subsidiary of the Borrower or any ERISA Affiliate is (or, if such plan
were terminated at such time, would under Section 4069 of ERISA be deemed
to be) an "employer" within the meaning of Section 3(5) of ERISA.
18
<PAGE>
"Pledge Agreement" means the Pledge Agreement dated as of the Closing
----------------
Date given by the Borrower and the other pledgors identified therein to the
Agent, to secure the obligations hereunder, as amended and modified.
"Preferred Stock" means the Preferred Stock of the Borrower, Series
---------------
1998, $.01 par value.
"Prime Rate" means the rate of interest per annum publicly announced
----------
from time to time by NationsBank as its prime rate in effect at its
principal office in Charlotte, North Carolina, with each change in the
Prime Rate being effective on the date such change is publicly announced as
effective (it being understood and agreed that the Prime Rate is a
reference rate used by NationsBank in determining interest rates on certain
loans and is not intended to be the lowest rate of interest charged on any
extension of credit by NationsBank to any debtor).
"Pro Forma Basis" means, with respect to any Transaction, that such
---------------
Transaction shall be deemed to have occurred as of the first day of the
four fiscal-quarter period ending as of the most recent fiscal quarter end
preceding the date of such Transaction with respect to which the Agent and
the Lenders have received the officer's certificate in accordance with the
provisions of Section 7.2(b). As used herein, "Transaction" means (i), any
corporate merger or consolidation as referred to in Section 8.3(a), (ii)
the incurrence of Indebtedness in accordance with Section 8.1(h), (i) and
(j), (iii) any sale or other disposition of assets as referred to in
Section 8.3(b), (iv) any acquisition of capital stock or securities or any
purchase, lease or other acquisition of property as referred to in Section
8.3(c) or (v) the making of any Restricted Payment as referred to in
Section 8.9.
"Property" means any interest in any kind of property or asset,
--------
whether real, personal or mixed, or tangible or intangible.
"Register" shall have the meaning assigned such term in Section
--------
11.3(c).
"Regulation T, U or X" means Regulation T, U or X, respectively, of
--------------------
the Board of Governors of the Federal Reserve System as from time to time
in effect and any successor to all or a portion thereof.
"Release" means any spilling, leaking, pumping, pouring, emitting,
-------
emptying, discharging, injecting, escaping, leaching, dumping or disposing
into the environment (including the abandonment or discarding of barrels,
containers and other closed receptacles containing any Materials of
Environmental Concern).
"Reportable Event" means any of the events set forth in Section
----------------
4043(c) of ERISA, other than those events as to which the notice
requirement has been waived by regulation.
19
<PAGE>
"Required Lenders" means, at any time, Lenders having more than sixty-
----------------
six and two-thirds percent (66 %) of the Commitments, or if the Commitments
have been terminated, Lenders having more than sixty-six and two-thirds
percent (66 %) of the aggregate principal amount of the Obligations
outstanding (taking into account in each case Participation Interests or
obligation to participate therein); provided that the Commitments of, and
--------
outstanding principal amount of Obligations (taking into account
Participation Interests therein) owing to, a Defaulting Lender shall be
excluded for purposes hereof in making a determination of Required Lenders.
"Requirement of Law" means, as to any Person, the certificate of
------------------
incorporation and by-laws or other organizational or governing documents of
such Person, and any law, treaty, rule or ordinance (including, without
limitation, Environmental Laws) 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 material property is subject.
"Responsible Officer" means the Chief Financial Officer, the
-------------------
Controller and the Vice President of Financial Planning and Analysis.
"Restricted Payment" means (i) any dividend or other distribution,
------------------
direct or indirect, on account of any shares of any class of stock now or
hereafter outstanding, except (A) a dividend payable solely in shares of
that class to the holders of that class and (B) dividends and other
distributions payable to a Credit Party, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value,
direct or indirect, of any shares of any class of stock now or hereafter
outstanding and (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock now or hereafter outstanding.
"Revolving Commitment" means, with respect to each Revolving Lender,
--------------------
the commitment of such Revolving Lender to make Revolving Loans in an
aggregate principal amount at any time outstanding of up to such Revolving
Lender's Revolving Commitment Percentage of the Aggregate Revolving
Committed Amount as specified in Schedule 2.1(a), as such amount may be
---------------
reduced from time to time in accordance with the provisions hereof.
"Revolving Commitment Percentage" means, for each Revolving Lender, a
-------------------------------
fraction (expressed as a decimal) the numerator of which is the Revolving
Commitment of such Revolving Lender at such time and the denominator of
which is the Aggregate Revolving Committed Amount at such time. The
initial Revolving Commitment Percentages are set out on Schedule 2.1(a).
---------------
"Revolving Committed Amount" means, collectively, the aggregate amount
--------------------------
of all of the Revolving Commitments and, individually, the amount of each
Revolving Lender's Revolving Commitment as specified in Schedule 2.1(a).
---------------
20
<PAGE>
"Revolving Lenders" means Lenders holding Revolving Commitments, as
------------------
identified on Schedule 2.1(a), and their successors and assigns.
---------------
"Revolving Loans" shall have the meaning assigned to such term in
---------------
Section 2.1(a).
"Revolving Note" or "Revolving Notes" means the promissory notes of
-------------- ---------------
the Borrower in favor of each of the Revolving Lenders evidencing the
Revolving Loans and Swingline Loans in substantially the form attached as
Schedule 2.1(e), individually or collectively, as appropriate, as such
---------------
promissory notes may be amended, modified, supplemented, extended, renewed
or replaced from time to time.
"Revolving Obligations" means, collectively, the Revolving Loans,
----------------------
Swingline Loans and LOC Obligations.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw
---
Hill, Inc., or any successor or assignee of the business of such division
in the business of rating securities.
"Security Agreement" means the Security Agreement dated as of the
------------------
Closing Date given by the Borrower and the other grantors identified
therein to the Agent, to secure the obligations hereunder, as amended and
modified.
"Single Employer Plan" means any Plan which is covered by Title IV of
--------------------
ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan.
"Sprint Agreement" means the agreement, effective January 1, 1997, by
----------------
and between the Borrower and Sprint/United Management Company, together
with contract orders related thereto.
"Subordinated Debt" means (i) the subordinated debt existing on the
-----------------
Closing Date as described on Schedule 8.1 and (ii) any other Indebtedness
------------
of a member of the Consolidated Group which by its terms is expressly
subordinated in right of payment to the prior payment of the obligations
under the Credit Agreement and the other Credit Documents on terms and
conditions (a) as set forth on Schedule 1.1 or (b) otherwise satisfactory
to the Agent and the Required Lenders.
"Subject Properties" shall have the meaning assigned to such term in
------------------
Section 6.16(a).
"Subsidiary" means, as to any Person, (a) any corporation more than
----------
50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time, any class or
classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time owned by such Person
directly or indirectly through Subsidiaries, and (b) any partnership,
association, joint venture or
21
<PAGE>
other entity in which such Person directly or indirectly through
Subsidiaries has more than 50% of the voting interests at any time. Unless
otherwise identified, "Subsidiary" or "Subsidiaries" shall mean
Subsidiaries of the Borrower.
"Support Obligations" means, with respect to any Person, without
-------------------
duplication, any obligations of such Person (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or
collection) guaranteeing or intended to guarantee any Indebtedness of any
other Person in any manner, whether direct or indirect, and including
without limitation any obligation, whether or not contingent, (i) to
purchase any such Indebtedness or any Property constituting security
therefor, (ii) to advance or provide funds or other support for the payment
or purchase of any such Indebtedness or to maintain working capital,
solvency or other balance sheet condition of such other Person (including
without limitation keep well agreements, maintenance agreements, comfort
letters or similar agreements or arrangements) for the benefit of any
holder of Indebtedness of such other Person, (iii) to lease or purchase
Property, securities or services primarily for the purpose of assuring the
holder of such Indebtedness, or (iv) to otherwise assure or hold harmless
the holder of such Indebtedness against loss in respect thereof. The
amount of any Support Obligation hereunder shall (subject to any
limitations set forth therein) be deemed to be an amount equal to the
outstanding principal amount (or maximum principal amount, if larger) of
the Indebtedness in respect of which such Support Obligation is made.
"Swingline Commitment" means the commitment of the Swingline Lender to
--------------------
make Swingline Loans in an aggregate principal amount at any time
outstanding up to the Swingline Committed Amount and the commitment of the
Revolving Lenders to purchase participation interests in the Swingline
Loans up to their respective Revolving Commitment Percentage as provided in
Section 2.3(b)(iii), as such amounts may be reduced from time to time in
accordance with the provisions hereof.
"Swingline Committed Amount" means the amount of the Swingline
--------------------------
Lender's Commitment as specified in Section 2.3(a).
"Swingline Lender" means NationsBank.
----------------
"Swingline Loan" means a swingline revolving loan made by the
--------------
Swingline Lender pursuant to the provisions of Section 2.3.
"Term Lenders" means Lenders holding Term Loan Commitments, as
------------
identified on Schedule 2.1(a), and their successors and assigns.
"Term Loan" shall have the meaning assigned to such term in Section
---------
2.4(a).
"Term Loan Commitment" means, with respect to each Term Lender, the
--------------------
commitment of such Term Lender to make its portion of the Term Loan as
specified on Schedule 2.1(a) (and for purposes of making determinations of
---------------
Required Lenders hereunder
22
<PAGE>
after the Closing Date and for purposes of calculations referred to in
Section 11.6(b), the principal amount outstanding on the Term Loan).
"Term Loan Commitment Percentage" means, for each Term Lender, a
-------------------------------
fraction (expressed as a percentage) the numerator of which is the amount
of the Term Loan Commitment (and after the Closing Date, the outstanding
principal amount of such Term Lender's Term Loan) of such Term Lender at
such time and the denominator of which is the aggregate amount of the Term
Loan Commitment (and after the Closing Date, the aggregate principal amount
of the Term Loan) at such time. The initial Term Loan Commitment
Percentages are set out on Schedule 2.1.
"Term Loan Committed Amount" means, collectively, the aggregate
--------------------------
amount of all of the Term Loan Commitments and, individually, the amount of
each Term Lender's Term Loan Commitment as specified on Schedule 2.1(a), as
such amounts may be reduced from time to time in accordance with the
provisions hereof.
"Term Note" or "Term Notes" means the promissory notes of the
--------- ----------
Borrower in favor of each of the Term Lenders evidencing the Term Loan in
substantially the form attached as Schedule 2.4(d), individually or
collectively, as appropriate, as such promissory notes may be amended,
modified, supplemented, extended or renewed from time to time.
"Termination Date" means March 12, 2002.
----------------
"Voting Stock" means, with respect to any Person, capital stock issued
------------
by such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even though the right so to
vote has been suspended by the happening of such a contingency.
"Year 2000 Problem" shall have the meaning assigned to such term in
-----------------
Section
6.17.
1.2 Computation of Time Periods.
---------------------------
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding."
1.3 Accounting Terms.
----------------
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Lenders hereunder shall be prepared, in accordance with GAAP applied on a
consistent basis. All calculations made for the purposes of determining
compliance with this Credit Agreement shall (except as otherwise expressly
provided herein) be made by application of GAAP applied on a basis consistent
with the most recent annual or quarterly financial statements delivered pursuant
to Section 7.1 hereof (or, prior to the delivery of the first
23
<PAGE>
financial statements pursuant to Section 7.1 hereof, consistent with the annual
audited financial statements referenced in Section 6.1(i) hereof); provided,
however, if (a) the Borrower shall object to determining such compliance on such
basis at the time of delivery of such financial statements due to any change in
GAAP or the rules promulgated with respect thereto or (b) the Agent or the
Required Lenders shall so object in writing within 30 days after delivery of
such financial statements, then such calculations shall be made on a basis
consistent with the most recent financial statements delivered by the Borrower
to the Lenders as to which no such objection shall have been made.
(b) It is further acknowledged and agreed that, except as expressly
provided otherwise, for purposes of determining the Applicable Percentage and
compliance with the financial covenants in Section 7.9 (and compliance therewith
on a Pro Forma Basis), in the case of acquisitions and dispositions which have
occurred during the applicable period to the extent permitted hereunder,
adjustments shall be made to take into account historical performance relating
thereto during such applicable period prior to the date of such acquisition or
disposition, and the effect of any Indebtedness paid with proceeds from a
disposition.
SECTION 2
CREDIT FACILITIES
-----------------
2.1 Revolving Loans.
---------------
(a) Revolving Commitment. During the Commitment Period, subject to the
--------------------
terms and conditions hereof, each Revolving Lender severally agrees to make
revolving credit loans (the "Revolving Loans") to the Borrower from time to time
---------------
in the amount of such Revolving Lender's Revolving Commitment Percentage of such
Revolving Loans for the purposes hereinafter set forth; provided that (i) with
--------
regard to the Revolving Lenders collectively, the aggregate principal amount of
Revolving Obligations outstanding at any time shall not exceed the Aggregate
Revolving Committed Amount, and (ii) with regard to each Revolving Lender
individually, such Revolving Lender's Revolving Commitment Percentage of
Obligations outstanding at any time shall not exceed such Revolving Lender's
Revolving Committed Amount. Revolving Loans may consist of Base Rate Loans or
Eurodollar Loans, or a combination thereof, as the Borrower may request, and may
be repaid and reborrowed in accordance with the provisions hereof.
(b) Revolving Loan Borrowings.
-------------------------
(i) Notice of Borrowing. The Borrower shall request a Revolving
-------------------
Loan borrowing by written notice (or telephone notice promptly confirmed in
writing) to the Agent not later than 11:00 A.M. (Charlotte, North Carolina
time) on the Business Day prior to the date of the requested borrowing in
the case of Base Rate Loans, and on the third Business Day prior to the
date of the requested borrowing in the case of Eurodollar Loans. Each such
request for borrowing shall be irrevocable and shall specify (A) that a
Revolving Loan is requested, (B) the date of the requested borrowing (which
shall be a Business Day),
24
<PAGE>
(C) the aggregate principal amount to be borrowed, and (D) whether the
borrowing shall be comprised of Base Rate Loans, Eurodollar Loans or a
combination thereof, and if Eurodollar Loans are requested, the Interest
Period(s) therefor. If the Borrower shall fail to specify in any such
Notice of Borrowing (I) an applicable Interest Period in the case of a
Eurodollar Loan, then such notice shall be deemed to be a request for an
Interest Period of one month, or (II) the type of Revolving Loan requested,
then such notice shall be deemed to be a request for a Base Rate Loan
hereunder. The Agent shall give notice to each Revolving Lender promptly
upon receipt of each Notice of Borrowing pursuant to this Section
2.1(b)(i), the contents thereof and each such Revolving Lender's share of
any borrowing to be made pursuant thereto.
(ii) Minimum Amounts. Each Revolving Loan that is a Eurodollar
---------------
Loan shall be in a minimum aggregate principal amount of $2,500,000 and
integral multiples of $500,000 in excess thereof. Each Revolving Loan that
is a Base Rate Loan shall be in a minimum aggregate principal amount of
$1,000,000 (or the remaining Revolving Committed Amount, if less) and
integral multiples of $100,000 in excess thereof.
(iii) Advances. Each Revolving Lender will make its
--------
Revolving Commitment Percentage of each Revolving Loan borrowing available
to the Agent for the account of the Borrower, or in such other manner as
the Agent may specify in writing, by 1:00 P.M. (Charlotte, North Carolina
time) on the date specified in the applicable Notice of Borrowing in
Dollars and in funds immediately available to the Agent. Such borrowing
will then be made available to the Borrower by the Agent by crediting the
account of the Borrower with the aggregate of the amounts made available to
the Agent by the Revolving Lenders and in like funds as received by the
Agent.
(c) Repayment. The principal amount of all Revolving Loans shall be due
---------
and payable in full on the Termination Date.
(d) Interest. Subject to the provisions of Section 3.1,
--------
(i) Base Rate Loans. During such periods as Revolving Loans shall
---------------
be comprised in whole or in part of Base Rate Loans, such Base Rate Loans
shall bear interest at a per annum rate equal to the Base Rate plus the
----
Applicable Percentage;
(ii) Eurodollar Loans. During such periods as Revolving Loans
----------------
shall be comprised in whole or in part of Eurodollar Loans, such Eurodollar
Loans shall bear interest at a per annum rate equal to the Eurodollar Rate
plus the Applicable Percentage.
----
Interest on Revolving Loans shall be payable in arrears on each applicable
Interest Payment Date (or at such other times as may be specified herein).
(e) Revolving Notes. The Revolving Loans shall be evidenced by a duly
---------------
executed Revolving Note in favor of each Revolving Lender.
25
<PAGE>
(f) Maximum Number of Eurodollar Loans. The Borrower will be limited to a
----------------------------------
maximum number of ten (10) Eurodollar Loans outstanding at any time (including
both Revolving Loans and Term Loans). For purposes hereof, Eurodollar Loans
with separate or different Interest Periods will be considered as separate
Eurodollar Loans even if their Interest Periods expire on the same date.
2.2 Letter of Credit Subfacility.
----------------------------
(a) Issuance. During the Commitment Period, subject to the terms and
--------
conditions hereof and of the LOC Documents, if any, and such other terms and
conditions which the Issuing Lender may reasonably require, the Issuing Lender
shall issue, and the Revolving Lenders shall participate in, such Letters of
Credit as the Borrower may request for its own account or for the account of
another Credit Party as provided herein, in a form acceptable to the Issuing
Lender, for the purposes hereinafter set forth; provided that (i) the aggregate
--------
amount of LOC Obligations shall not exceed FIVE MILLION DOLLARS ($5,000,000) at
any time (the "LOC Committed Amount"), (ii) with regard to the Revolving Lenders
--------------------
collectively, the aggregate principal amount of Revolving Obligations
outstanding at any time shall not exceed the Aggregate Revolving Committed
Amount, and (iii) with regard to each Revolving Lender individually, such
Revolving Lender's Revolving Commitment Percentage of Revolving Obligations
outstanding at any time shall not exceed such Revolving Lender's Revolving
Commitment. Letters of Credit issued hereunder shall not have an original
expiry date more than one year from the date of issuance or extension, nor an
expiry date, whether as originally issued or by extension, extending beyond the
Termination Date. Each Letter of Credit shall comply with the related LOC
Documents. The issuance date of each Letter of Credit shall be a Business Day.
(b) Notice and Reports. The request for the issuance of a Letter of Credit
------------------
shall be submitted by the Borrower to the Issuing Lender at least three (3)
Business Days prior to the requested date of issuance (or such shorter period as
may be agreed by the Issuing Lender). A form of Notice of Request for Letter of
Credit is attached as Schedule 2.2(b). The Issuing Lender will provide to the
---------------
Agent at least monthly, and more frequently upon request, a detailed summary
report on its Letters of Credit and the activity thereon, in form and substance
acceptable to the Agent. In addition, the Issuing Lender will provide to the
Agent for dissemination to the Revolving Lenders at least quarterly, and more
frequently upon request, a detailed summary report on its Letters of Credit and
the activity thereon, including, among other things, the Credit Party for whose
account the Letter of Credit is issued, the beneficiary, the face amount, and
the expiry date. The Issuing Lender will provide copies of the Letters of
Credit to the Agent and the Revolving Lenders promptly upon request.
(c) Participation. Each Revolving Lender, upon issuance of a Letter of
-------------
Credit, shall be deemed to have purchased without recourse a risk participation
from the applicable Issuing Lender in such Letter of Credit and the obligations
arising thereunder, in each case in an amount equal to its pro rata share of the
obligations under such Letter of Credit (based on the respective Revolving
Commitment Percentages of the Revolving Lenders) and shall absolutely,
unconditionally and irrevocably assume, as primary obligor and not as surety,
and be obligated to pay to the Issuing Lender therefor and discharge when due,
its pro rata share of the obligations arising under such
26
<PAGE>
Letter of Credit. Without limiting the scope and nature of each Revolving
Lender's participation in any Letter of Credit, to the extent that the Issuing
Lender has not been reimbursed as required hereunder or under any such Letter of
Credit, each such Revolving Lender shall pay to the Issuing Lender its pro rata
share of such unreimbursed drawing in same day funds on the day of notification
by the Issuing Lender of an unreimbursed drawing pursuant to the provisions of
subsection (d) hereof. The obligation of each Revolving Lender to so reimburse
the Issuing Lender shall be absolute and unconditional and shall not be affected
by the occurrence of a Default, an Event of Default or any other occurrence or
event. Any such reimbursement shall not relieve or otherwise impair the
obligation of the Borrower to reimburse the Issuing Lender under any Letter of
Credit, together with interest as hereinafter provided.
(d) Reimbursement. In the event of any drawing under any Letter of Credit,
-------------
the Issuing Lender will promptly notify the Borrower. Unless the Borrower shall
immediately notify the Issuing Lender that the Borrower intends to otherwise
reimburse the Issuing Lender for such drawing, the Borrower shall be deemed to
have requested that the Revolving Lenders make a Revolving Loan in the amount of
the drawing as provided in subsection (e) hereof on the related Letter of
Credit, the proceeds of which will be used to satisfy the related reimbursement
obligations. The Borrower promises to reimburse the Issuing Lender on the day
of drawing under any Letter of Credit (either with the proceeds of a Revolving
Loan obtained hereunder or otherwise) in same day funds. If the Borrower shall
fail to reimburse the Issuing Lender as provided hereinabove, the unreimbursed
amount of such drawing shall bear interest at a per annum rate equal to the Base
Rate plus the sum of (i) the Applicable Percentage and (ii) two percent (2%).
The Borrower's reimbursement obligations hereunder shall be absolute and
unconditional under all circumstances irrespective of any rights of setoff,
counterclaim or defense to payment the Borrower may claim or have against the
Issuing Lender, the Agent, the Lenders, the beneficiary of the Letter of Credit
drawn upon or any other Person, including without limitation any defense based
on any failure of the Borrower or any other Credit Party to receive
consideration or the legality, validity, regularity or unenforceability of the
Letter of Credit. The Issuing Lender will promptly notify the other Revolving
Lenders of the amount of any unreimbursed drawing and each Revolving Lender
shall promptly pay to the Agent for the account of the Issuing Lender in Dollars
and in immediately available funds, the amount of such Revolving Lender's pro
rata share of such unreimbursed drawing. Such payment shall be made on the day
such notice is received by such Revolving Lender from the Issuing Lender if such
notice is received at or before 2:00 P.M. (Charlotte, North Carolina time)
otherwise such payment shall be made at or before 12:00 Noon (Charlotte, North
Carolina time) on the Business Day next succeeding the day such notice is
received. If such Revolving Lender does not pay such amount to the Issuing
Lender in full upon such request, such Revolving Lender shall, on demand, pay to
the Agent for the account of the Issuing Lender interest on the unpaid amount
during the period from the date of such drawing until such Revolving Lender pays
such amount to the Issuing Lender in full at a rate per annum equal to, if paid
within two (2) Business Days of the date that such Revolving Lender is required
to make payments of such amount pursuant to the preceding sentence, the Federal
Funds Rate and thereafter at a rate equal to the Base Rate. Each Revolving
Lender's obligation to make such payment to the Issuing Lender, and the right of
the Issuing Lender to receive the same, shall be absolute and unconditional,
shall not be affected by any circumstance whatsoever and without regard to the
termination of this Credit Agreement or the Commitments hereunder, the existence
of a Default or Event of Default or the
27
<PAGE>
acceleration of the obligations of the Borrower hereunder and shall be made
without any offset, abatement, withholding or reduction whatsoever.
Simultaneously with the making of each such payment by a Revolving Lender to the
Issuing Lender, such Revolving Lender shall, automatically and without any
further action on the part of the Issuing Lender or such Revolving Lender,
acquire a participation in an amount equal to such payment (excluding the
portion of such payment constituting interest owing to the Issuing Lender) in
the related unreimbursed drawing portion of the LOC Obligation and in the
interest thereon and in the related LOC Documents, and shall have a claim
against the Borrower with respect thereto.
(e) Repayment with Revolving Loans. On any day on which the Borrower shall
------------------------------
have requested, or been deemed to have requested, a Revolving Loan advance to
reimburse a drawing under a Letter of Credit, the Agent shall give notice to the
Revolving Lenders that a Revolving Loan has been requested or deemed requested
by the Borrower to be made in connection with a drawing under a Letter of
Credit, in which case a Revolving Loan advance comprised of Base Rate Loans (or
Eurodollar Loans to the extent the Borrower has complied with the procedures of
Section 2.1(b)(i) with respect thereto) shall be immediately made to the
Borrower by all Revolving Lenders (notwithstanding any termination of the
Commitments pursuant to Section 9.2) pro rata based on the respective Revolving
--- ----
Commitment Percentages of the Revolving Lenders (determined before giving effect
to any termination of the Commitments pursuant to Section 9.2) and the proceeds
thereof shall be paid directly to the Issuing Lender for application to the
respective LOC Obligations. Each such Revolving Lender hereby irrevocably
agrees to make its pro rata share of each such Revolving Loan immediately upon
any such request or deemed request in the amount, in the manner and on the date
specified in the preceding sentence notwithstanding (i) the amount of such
---------------
borrowing may not comply with the minimum amount for advances of Revolving Loans
otherwise required hereunder, (ii) whether any conditions specified in Section
5.2 are then satisfied, (iii) whether a Default or an Event of Default then
exists, (iv) failure for any such request or deemed request for Revolving Loan
to be made by the time otherwise required hereunder, (v) whether the date of
such borrowing is a date on which Revolving Loans are otherwise permitted to be
made hereunder or (vi) any termination of the Commitments relating thereto
immediately prior to or contemporaneously with such borrowing. In the event
that any Revolving Loan cannot for any reason be made on the date otherwise
required above (including, without limitation, as a result of the commencement
of a proceeding under the Bankruptcy Code with respect to the Borrower or any
Credit Party), then each such Revolving Lender hereby agrees that it shall
forthwith purchase (as of the date such borrowing would otherwise have occurred,
but adjusted for any payments received from the Borrower on or after such date
and prior to such purchase) from the Issuing Lender such participation in the
outstanding LOC Obligations as shall be necessary to cause each such Revolving
Lender to share in such LOC Obligations ratably (based upon the respective
Commitment Percentages of the Revolving Lenders (determined before giving effect
to any termination of the Commitments pursuant to Section 9.2)), provided that
--------
in the event such payment is not made on the day of drawing, such Revolving
Lender shall pay in addition to the Issuing Lender interest on the amount of its
unfunded Participation Interest at a rate equal to, if paid within two (2)
Business Days of the date of drawing, the Federal Funds Rate, and thereafter at
the Base Rate.
28
<PAGE>
(f) Designation of other Credit Parties as Account Parties.
------------------------------------------------------
Notwithstanding anything to the contrary set forth in this Credit Agreement,
including without limitation Section 2.2(a) hereof, a Letter of Credit issued
hereunder may contain a statement to the effect that such Letter of Credit is
issued for the account of a Credit Party, provided that notwithstanding such
statement, the Borrower shall be the actual account party for all purposes of
this Credit Agreement for such Letter of Credit and such statement shall not
affect the Borrower's reimbursement obligations hereunder with respect to such
Letter of Credit.
(g) Renewal, Extension. The renewal or extension of any Letter of Credit
------------------
shall, for purposes hereof, be treated in all respects the same as the issuance
of a new Letter of Credit hereunder.
(h) Uniform Customs and Practices. The Issuing Lender may have the Letters
-----------------------------
of Credit be subject to The Uniform Customs and Practice for Documentary Credits
(the "UCP") or the International Standby Practices 1998 (the "ISP98"), each as
--- -----
published as of the date of issue by the International Chamber of Commerce, in
which case the UCP or the ISP98, as appropriate, may be incorporated therein and
deemed in all respects to be a part thereof.
(i) Indemnification; Nature of Issuing Lender's Duties.
--------------------------------------------------
(i) In addition to its other obligations under this Section 2.2, the
Borrower hereby agrees to protect, indemnify, pay and save the Issuing
Lender harmless from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable
attorneys' fees) that the Issuing Lender may incur or be subject to as a
consequence, direct or indirect, of (A) the issuance of any Letter of
Credit or (B) the failure of the Issuing Lender to honor a drawing under a
Letter of Credit as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto government or
governmental authority (all such acts or omissions, herein called
"Government Acts").
----------------
(ii) As between the Borrower and the Issuing Lender, the Borrower shall
assume all risks of the acts, omissions or misuse of any Letter of Credit
by the beneficiary thereof. The Issuing Lender shall not be responsible:
(A) for the form, validity, sufficiency, accuracy, genuineness or legal
effect of any document submitted by any party in connection with the
application for and issuance of any Letter of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole
or in part, that may prove to be invalid or ineffective for any reason; (C)
for errors, omissions, interruptions or delays in transmission or delivery
of any messages, by mail, cable, telegraph, telex or otherwise, whether or
not they be in cipher; (D) for any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under a
Letter of Credit or of the proceeds thereof; and (E) for any consequences
arising from causes beyond the control of the Issuing Lender, including,
without limitation, any
29
<PAGE>
Government Acts. None of the above shall affect, impair, or prevent the vesting
of the Issuing Lender's rights or powers hereunder.
(iii) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by
the Issuing Lender, under or in connection with any Letter of Credit or the
related certificates, if taken or omitted in good faith, shall not put such
Issuing Lender under any resulting liability to the Borrower or any other
Credit Party. It is the intention of the parties that this Credit
Agreement shall be construed and applied to protect and indemnify the
Issuing Lender against any and all risks involved in the issuance of the
Letters of Credit, all of which risks are hereby assumed by the Borrower
(on behalf of itself and each of the other Credit Parties), including,
without limitation, any and all Government Acts. The Issuing Lender shall
not, in any way, be liable for any failure by the Issuing Lender or anyone
else to pay any drawing under any Letter of Credit as a result of any
Government Acts or any other cause beyond the control of the Issuing
Lender.
(iv) Nothing in this subsection (i) is intended to limit the
reimbursement obligations of the Borrower contained in subsection (d)
above. The obligations of the Borrower under this subsection (i) shall
survive the termination of this Credit Agreement. No act or omissions of
any current or prior beneficiary of a Letter of Credit shall in any way
affect or impair the rights of the Issuing Lender to enforce any right,
power or benefit under this Credit Agreement.
(v) Notwithstanding anything to the contrary contained in this
subsection (i), the Borrower shall have no obligation to indemnify the
Issuing Lender in respect of any liability incurred by the Issuing Lender
(A) arising solely out of the gross negligence or willful misconduct of the
Issuing Lender, as determined by a court of competent jurisdiction, or (B)
caused by the Issuing Lender's failure to pay under any Letter of Credit
after presentation to it of a request strictly complying with the terms and
conditions of such Letter of Credit, as determined by a court of competent
jurisdiction, unless such payment is prohibited by any law, regulation,
court order or decree.
(j) Responsibility of Issuing Lender. It is expressly understood and agreed
--------------------------------
that the obligations of the Issuing Lender hereunder to the Lenders are only
those expressly set forth in this Credit Agreement and that the Issuing Lender
shall be entitled to assume that the conditions precedent set forth in Section
5.2 have been satisfied unless it shall have acquired actual knowledge that any
such condition precedent has not been satisfied; provided, however, that nothing
-------- -------
set forth in this Section 2.2 shall be deemed to prejudice the right of any
Lender to recover from the Issuing Lender any amounts made available by such
Lender to the Issuing Lender pursuant to this Section 2.2 in the event that it
is determined by a court of competent jurisdiction that the payment with respect
to a Letter of Credit constituted gross negligence or willful misconduct on the
part of the Issuing Lender.
30
<PAGE>
(k) Conflict with LOC Documents. In the event of any conflict between
---------------------------
this Credit Agreement and any LOC Document (including any letter of credit
application), this Credit Agreement shall control.
2.3 Swingline Loan Subfacility.
--------------------------
(a) Swingline Commitment. During the Commitment Period, subject to the
--------------------
terms and conditions hereof, the Swingline Lender, in its individual
capacity, agrees to make certain revolving credit loans requested by the
Borrower in Dollars to the Borrower (each a "Swingline Loan" and,
--------------
collectively, the "Swingline Loans") for the purposes hereinafter set
---------------
forth; provided, however, (i) the aggregate principal amount of Swingline
-------- -------
Loans outstanding at any time shall not exceed FIVE MILLION DOLLARS
($5,000,000) (the "Swingline Committed Amount"), and (ii) with regard to
--------------------------
the Revolving Lenders collectively, the aggregate principal amount of
Revolving Obligations outstanding at any time shall not exceed the
Aggregate Revolving Committed Amount. Swingline Loans hereunder shall be
made as Base Rate Loans, and may be repaid or reborrowed in accordance with
the provisions hereof.
(b) Swingline Loan Advances.
-----------------------
(i) Notices; Disbursement. Whenever the Borrower desires
---------------------
a Swingline Loan advance hereunder it shall give written notice (or
telephonic notice promptly confirmed in writing) to the Swingline Lender
not later than 11:00 A.M. (Charlotte, North Carolina time) on the Business
Day of the requested Swingline Loan advance. Each such notice shall be
irrevocable and shall specify (A) that a Swingline Loan advance is
requested, (B) the date of the requested Swingline Loan advance (which
shall be a Business Day) and (C) the principal amount of and Interest
Period for the Swingline Loan advance requested. Each Swingline Loan shall
have such maturity date as the Swingline Lender and the Borrower shall
agree upon receipt by the Swingline Lender of any such notice from the
Borrower. The Swingline Lender shall initiate the transfer of funds
representing the Swingline Loan advance to the Borrower by 3:00 P.M.
(Charlotte, North Carolina time) on the Business Day of the requested
borrowing. Notwithstanding the foregoing provisions of this subsection (i),
the Borrower and the Swingline Lender may from time to time agree to make
Swingline Loan advances pursuant to an "auto-borrow" and "zero-balance" or
other similar arrangement, subject however to the conditions and
limitations relating to the Swingline Loans set out herein.
(ii) Minimum Amounts. Each Swingline Loan advance shall
be in a minimum principal amount of $50,000 and in integral multiples of
$50,000 in excess thereof (or the remaining amount of the Swingline
Committed Amount, if less); provided that in the event that an "auto-
borrow" and "zero balance" or other similar arrangement shall then be in
place with the Swingline Lender, such minimum amounts, if any, provided by
--------
such agreement.
(iii) Repayment of Swingline Loans. The principal amount of
----------------------------
all Swingline Loans shall be due and payable on the earlier of (A) the
maturity date agreed to by the
31
<PAGE>
Swingline Lender and the Borrower with respect to such Loan (which maturity
date shall not be a date more than thirty (30) Business Days from the date
of advance thereof) or (B) the Termination Date. The Swingline Lender may,
at any time, in its sole discretion, by written notice to the Borrower and
the Revolving Lenders, demand repayment of its Swingline Loans by way of a
Revolving Loan advance, in which case the Borrower shall be deemed to have
requested a Revolving Loan advance comprised solely of Base Rate Loans in
the amount of such Swingline Loans; provided, however, that any such demand
-------- -------
shall be deemed to have been given one Business Day prior to the
Termination Date and on the date of the occurrence of any Event of Default
described in Section 9.1 and upon acceleration of the indebtedness
hereunder and the exercise of remedies in accordance with the provisions of
Section 9.2. Each Revolving Lender hereby irrevocably agrees to make its
pro rata share of each such Revolving Loan in the amount, in the manner and
on the date specified in the preceding sentence notwithstanding (I) the
---------------
amount of such borrowing may not comply with the minimum amount for
advances of Revolving Loans otherwise required hereunder, (II) whether any
conditions specified in Section 5.2 are then satisfied, (III) whether a
Default or an Event of Default then exists, (IV) failure of any such
request or deemed request for Revolving Loan to be made by the time
otherwise required hereunder, (V) whether the date of such borrowing is a
date on which Revolving Loans are otherwise permitted to be made hereunder
or (VI) any termination of the Commitments relating thereto immediately
prior to or contemporaneously with such borrowing. In the event that any
Revolving Loan cannot for any reason be made on the date otherwise required
above (including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code with respect to the Borrower or any
other Credit Party), then each Revolving Lender hereby agrees that it shall
forthwith purchase (as of the date such borrowing would otherwise have
occurred, but adjusted for any payments received from the Borrower on or
after such date and prior to such purchase) from the Swingline Lender such
Participation Interests in the outstanding Swingline Loans as shall be
necessary to cause each such Revolving Lender to share in such Swingline
Loans ratably based upon its Revolving Commitment Percentage of the
Revolving Committed Amount (determined before giving effect to any
termination of the Commitments pursuant to Section 3.4), provided that (A)
--------
all interest payable on the Swingline Loans shall be for the account of the
Swingline Lender until the date as of which the respective Participation
Interest is funded and (B) at the time any purchase of Participation
Interests pursuant to this sentence is actually made, the purchasing
Revolving Lender shall be required to pay to the Swingline Lender, to the
extent not paid to the Swingline Lender by the Borrower in accordance with
the terms of subsection (c) below, interest on the principal amount of
Participation Interests purchased for each day from and including the day
upon which such borrowing would otherwise have occurred to but excluding
the date of payment for such Participation Interests, at the rate equal to
the Federal Funds Rate.
(c) Interest on Swingline Loans.
---------------------------
Subject to the provisions of Section 3.1, each Swingline Loan shall bear
interest at a per annum rate equal to the Base Rate. Interest on Swingline Loans
shall be payable in arrears on each applicable Interest Payment Date.
32
<PAGE>
(d) Swingline Note. The Swingline Loans shall be evidenced by the
--------------
Revolving Note.
2.4 Term Loan.
---------
(a) Term Loan Commitment. Subject to the terms and conditions hereof,
each Term Lender severally agrees to make its Term Loan Commitment Percentage of
a term loan (the "Term Loan") in the aggregate principal amount of TWENTY-FIVE
---------
MILLION DOLLARS ($25,000,000) to the Borrower on the Closing Date for the
purposes hereinafter set forth. The Term Loan may consist of Base Rate Loans or
Eurodollar Loans, or a combination thereof, as the Borrower may request. Amounts
repaid on the Term Loan may not be reborrowed.
(b) Term Loan Borrowing. The Borrower shall submit an appropriate Notice
-------------------
of Borrowing relating to the Term Loan not later than 11:00 A.M. (Charlotte,
North Carolina time) on the Closing Date, with respect to the portion of the
Term Loan initially consisting of a Base Rate Loan, or on the third Business Day
prior to the Closing Date, with respect to the portion of the Term Loan
initially consisting of one or more Eurodollar Loans, which Notice of Borrowing
shall be irrevocable and shall specify (i) that the funding of the Term Loan is
requested, and (ii) whether the funding of the Term Loan shall be comprised of
Base Rate Loans, Eurodollar Loans or combination thereof, and if Eurodollar
Loans are requested, the Interest Period(s) therefor. If the Borrower shall fail
to deliver such Notice of Borrowing to the Agent by 11:00 A.M. (Charlotte, North
Carolina time) on the third Business Day prior to the Closing Date, then the
full amount of the Term Loan shall be initially comprised of Base Rate Loans.
Each Term Lender shall make its Term Loan Commitment Percentage of the Term Loan
available to the Agent for the account of the Borrower, or in such other manner
as the Agent may specify in writing, by 1:00 P.M. (Charlotte, North Carolina
time) on the Closing Date in Dollars and in funds immediately available to the
Agent.
(c) Minimum Amounts. The portion of the Term Loan that is composed of
---------------
Eurodollar Loans shall be in a minimum aggregate principal amount of $2,500,000
and integral multiples of $500,000 in excess thereof. The portion of the Term
Loan that is composed of Base Rate Loans shall be in a minimum aggregate
principal amount of $1,000,000 (or the remaining portion of the Term Loan, if
less) and integral multiples of $100,000 in excess thereof.
(d) Repayment. The aggregate principal amount of the Term Loan shall be
---------
repaid in twelve (12) consecutive quarterly installments as follows:
Date Installment
- ---- -----------
June 30, 1999 $0
September 30, 1999 $0
December 31, 1999 $0
March 31, 2000 $0
June 30, 2000 $2,000,000
September 30, 2000 $2,000,000
December 31, 2000 $2,000,000
33
<PAGE>
March 31, 2001 $2,000,000
June 30, 2001 $2,000,000
September 30, 2001 $2,000,000
December 31, 2001 $3,000,000
March 12, 2002 $10,000,000
-----------
Total $25,000,000
The foregoing amortization payments are subject to reduction as provided in
Section 3.3(b).
(e) Interest. Subject to the provisions of Section 3.1,
--------
(i) Base Rate Loans. During such periods as the Term Loan shall
---------------
be comprised in whole or in part of Base Rate Loans, such Base Rate Loans
shall bear interest at a per annum rate equal to the sum of the Base Rate
plus the Applicable Percentage; and
----
(ii) Eurodollar Loans. During such periods as the Term Loan shall
----------------
be comprised in whole or in part of Eurodollar Loans, such Eurodollar Loans
shall bear interest at a per annum rate equal to the sum of the Eurodollar
Rate plus the Applicable Percentage.
----
Interest on the Term Loan shall be payable in arrears on each applicable
Interest Payment Date (or at such other time as may be specified herein).
(f) Term Notes. The Term Loan shall be evidenced by a duly executed Term
----------
Note in favor of each Term Lender.
(g) Maximum Number of Eurodollar Loans. The Borrower will be limited to a
----------------------------------
maximum number of ten (10) Eurodollar Loans outstanding at any time (including
both Term Loans and Revolving Loans). For purposes hereof, Eurodollar Loans
with separate or different Interest Periods will be considered as separate
Eurodollar Loans even if their Interest Periods expire on the same date.
SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
----------------------------------------------
3.1 Default Rate.
------------
Upon the occurrence, and during the continuance, of an Event of Default,
the principal of and, to the extent permitted by law, interest on the Loans and
any other amounts owing hereunder or under the other Credit Documents shall bear
interest, payable on demand, at a per annum rate 2% greater than the rate which
would otherwise be applicable (or if no rate is applicable, whether in respect
of interest, fees or other amounts, then 2% greater than the Base Rate).
34
<PAGE>
3.2 Extension and Conversion.
------------------------
Subject to the terms of Section 5.2, the Borrower shall have the option, on
any Business Day, to extend existing Loans into a subsequent permissible
Interest Period or to convert Loans into Loans of another interest rate type;
provided, however, that (i) except as provided in Section 3.8, Eurodollar Loans
- -------- -------
may be converted into Base Rate Loans only on the last day of the Interest
Period applicable thereto, (ii) Eurodollar Loans may be extended, and Base Rate
Loans may be converted into Eurodollar Loans, only if no Default or Event of
Default is in existence on the date of extension or conversion, (iii) Loans
extended as, or converted into, Eurodollar Loans shall be subject to the terms
of the definition of "Interest Period" set forth in Section 1.1 and shall be in
---------------
such minimum amounts as provided in, with respect to Revolving Loans, Section
2.1(b)(ii) and, with respect to Term Loan, Section 2.4(c), and (iv) any request
for extension or conversion of a Eurodollar Loan which shall fail to specify an
Interest Period shall be deemed to be a request for an Interest Period of one
month. Each such extension or conversion shall be effected by the Borrower by
giving a Notice of Extension/Conversion (or telephone notice promptly confirmed
in writing) to the Agent prior to 11:00 A.M. (Charlotte, North Carolina time) on
the Business Day of, in the case of the conversion of a Eurodollar Loan into a
Base Rate Loan, and on the third Business Day prior to, in the case of the
extension of a Eurodollar Loan as, or conversion of a Base Rate Loan into, a
Eurodollar Loan, the date of the proposed extension or conversion, specifying
the date of the proposed extension or conversion, the Loans to be so extended or
converted, the types of Loans into which such Loans are to be converted and, if
appropriate, the applicable Interest Periods with respect thereto. Each request
for extension or conversion shall be irrevocable and shall constitute a
representation and warranty by the Borrower of the matters specified in Section
5.2. In the event the Borrower fails to request extension or conversion of any
Eurodollar Loan in accordance with this Section, or any such conversion or
extension is not permitted or required by this Section, then such Eurodollar
Loan shall be automatically converted into a Base Rate Loan at the end of the
Interest Period applicable thereto. The Agent shall give each Lender notice as
promptly as practicable of any such proposed extension or conversion affecting
any Loan.
3.3 Prepayments.
-----------
(a) Voluntary Prepayments. The Loans may be repaid in whole or in part
---------------------
without premium or fee; provided that (i) Eurodollar Loans may be prepaid only
--------
upon three (3) Business Days' prior written notice to the Agent and must be
accompanied by payment of any amounts owing under Section 3.11, and (ii) partial
prepayments shall be (A) in the case of Eurodollar Loans, in a minimum principal
amount of $2,500,000 and integral multiples of $250,000 in excess thereof, (B)
in the case of Base Rate Loans, in a minimum principal amount of $1,000,000 and
integral multiples of $100,000 in excess thereof and (C) in the case of
Swingline Loans, in a minimum aggregate principal amount of $50,000 and integral
multiples of $50,000 in excess thereof, provided that in the event that an
--------
"auto-borrow" and "zero-balance" or other similar arrangement shall then be in
place with the Swingline Lender, prepayments shall be in such minimum amounts,
if any, provided by such agreement.
(b) Mandatory Prepayments.
---------------------
35
<PAGE>
(i) Revolving Committed Amount. If at any time, (i) the aggregate
--------------------------
principal amount of Revolving Obligations shall exceed the Aggregate
Revolving Committed Amount, (ii) the aggregate amount of LOC Obligations
shall exceed the LOC Committed Amount or (iii) the aggregate amount of
Swingline Loans shall exceed the Swingline Committed Amount, the Borrower
shall immediately make payment on the Revolving Loans and/or to a cash
collateral account in respect of the LOC Obligations, in an amount
sufficient to eliminate the deficiency.
(ii) Equity Transactions. Until the Term Loan has been repaid in
-------------------
full, the Term Loan shall be prepaid as hereafter provided in an amount
equal to one hundred percent (100%) of the Net Proceeds received from any
Equity Transaction; provided, however, so long as the Preferred Stock
remains outstanding and no Default or Event of Default exists hereunder the
Borrower shall be permitted to apply up to 20% of the Net Proceeds of any
public offering of the Borrower's common stock to redeem shares of the
Preferred Stock.
(c) Application. Mandatory prepayments made pursuant to Section 3.3(b)(ii)
-----------
shall be applied to the Term Loan and shall be applied to principal installments
due with respect to the Term Loan in the inverse order of principal installment
maturity. Mandatory and voluntary prepayments on Revolving Obligations shall be
applied first to Swingline Loans, then to Revolving Loans which are Base Rate
Loans, then to Revolving Loans which are Eurodollar Loans in direct order of
Interest Period maturities and then to a cash collateral account to secure LOC
Obligations. Voluntary prepayments on the Term Loan shall be applied to, and
serve to reduce, the remaining principal amortization installments ratably.
Amounts prepaid on the Revolving Obligations may be reborrowed in accordance
with the provisions hereof. Amounts prepaid on the Term Loan may not be
reborrowed.
3.4 Termination and Reduction of Commitments
----------------------------------------
(a) Reductions. The Aggregate Revolving Committed Amount may be terminated
----------
or permanently reduced in whole or in part upon three (3) Business Days' prior
written notice to the Agent, provided that (i) after giving effect to any
--------
voluntary reduction the aggregate amount of Revolving Obligations shall not
exceed the Aggregate Revolving Committed Amount, as reduced, and (ii) partial
reductions shall be in a minimum principal amount of $5,000,000, and in integral
multiples of $1,000,000 in excess thereof.
(b) Termination of Commitments. The Commitments hereunder shall terminate
--------------------------
on the Termination Date.
3.5 Fees.
----
(a) Commitment Fee. In consideration of the Revolving Commitments
--------------
hereunder, the Borrower agrees to pay to the Agent for the ratable benefit of
the Revolving Lenders a commitment fee (the "Commitment Fee") equal to the
--------------
Applicable Percentage per annum on the
36
<PAGE>
average daily unused amount of the Revolving Committed Amount for the applicable
period. The Commitment Fee shall be payable quarterly in arrears on the 15th day
following the last day of each calendar quarter for the immediately preceding
quarter (or portion thereof) beginning with the first such date to occur after
the Closing Date. For purposes of computation of the Commitment Fee, Swingline
Loans shall not be counted toward or considered usage under the Revolving
Committed Amount.
(b) Letter of Credit Fees.
---------------------
(i) Letter of Credit Fee. In consideration of the LOC Commitment
--------------------
hereunder, the Borrower agrees to pay to the Agent for the ratable benefit
of the Revolving Lenders a fee (the "Letter of Credit Fee") equal to the
--------------------
Applicable Percentage per annum on the average daily maximum amount
available to be drawn under Letters of Credit from the date of issuance to
the date of expiration. The Letter of Credit Fee shall be payable
quarterly in arrears on the 15th day following the last day of each
calendar quarter for the immediately preceding quarter (or portion thereof)
beginning with the first such date to occur after the Closing Date.
(ii) Issuing Lender Fee. In addition to the Letter of Credit Fee,
------------------
the Borrower agrees to pay to the Issuing Lender for its own account
without sharing by the other Lenders (A) such fronting and negotiation fees
as may be mutually agreed upon by the Issuing Lender and the Borrower from
time to time and (B) customary charges of the Issuing Lender with respect
to the issuance, amendment, transfer, administration, cancellation and
conversion of, and drawings under, such Letters of Credit (collectively,
the "Issuing Lender Fees").
-------------------
(c) Agent's Fees. The Borrower agrees to pay to the Agent, for its
------------
own account, an annual administrative fee and such other fees, if any, referred
to in the Agent's Fee Letter (collectively, the "Agent's Fees").
------------
3.6 Capital Adequacy.
----------------
If any Lender has determined, after the date hereof, that the adoption
or the becoming effective of, or any change in, or any change by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof in the interpretation or administration
of, any applicable law, rule or regulation regarding capital adequacy, or
compliance by such Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on such Lender's capital or assets as a consequence of its commitments or
obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, effectiveness, change or compliance (taking into
consideration such Lender's policies with respect to capital adequacy), then,
upon notice from such Lender to the Borrower and the Agent, the Borrower shall
be obligated to pay to such Lender such additional amount or amounts as will
compensate such Lender for such reduction. Each
37
<PAGE>
determination by any such Lender of amounts owing under this Section shall,
absent manifest error, be conclusive and binding on the parties hereto.
3.7 Inability To Determine Interest Rate.
------------------------------------
If prior to the first day of any Interest Period, the 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, the Agent shall give telecopy or telephonic notice
thereof to the Borrower and the Lenders as soon as practicable thereafter (which
notice shall be withdrawn the Agent whenever such circumstances no longer
exist). If such notice is given (a) any Eurodollar Loans requested to be made
on the first day of such Interest Period shall be made as Base Rate Loans and
(b) any Loans that were to have been converted on the first day of such Interest
Period to or continued as Eurodollar Loans shall be converted to or continued as
Base Rate Loans. Until such notice has been withdrawn by the Agent, no further
Eurodollar Loans shall be made or continued as such, nor shall the Borrower have
the right to convert Base Rate Loans to Eurodollar Loans.
3.8 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
occurring after the Closing Date shall make it unlawful for any Lender to make
or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such
Lender shall promptly give written notice of such circumstances to the Borrower
and the Agent (which notice shall be withdrawn by such Lender whenever such
circumstances no longer exist), (b) the commitment of such Lender hereunder to
make Eurodollar Loans, continue Eurodollar Loans as such and convert a Base Rate
Loan to Eurodollar Loans shall forthwith be canceled and, until such time as it
shall no longer be unlawful for such Lender to make or maintain Eurodollar
Loans, such Lender shall then have a commitment only to make a Base Rate Loan
when a Eurodollar Loan is requested and (c) such Lender's Loans then outstanding
as Eurodollar Loans, if any, shall be converted automatically to Base Rate 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. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of the
then current Interest Period with respect thereto, the Borrower shall pay to
such Lender such amounts, if any, as may be required pursuant to Section 3.11.
3.9 Requirements of Law.
-------------------
If, after the date hereof, the adoption of or any change in any Requirement
of Law or in the interpretation or application thereof applicable to any Lender,
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 Closing Date (or, if later, the date on which such
Lender becomes a Lender):
38
<PAGE>
(a) shall subject such Lender to any tax of any kind whatsoever with
respect to any Letter of Credit, any Eurodollar Loans made by it or its
obligation to make Eurodollar Loans, or change the basis of taxation of
payments to such Lender in respect thereof (except for (i) Non-Excluded
Taxes covered by Section 3.10 (including Non-Excluded Taxes imposed solely
by reason of any failure of such Lender to comply with its obligations
under Section 3.10(b)) and (ii) changes in taxes measured by or imposed
upon the overall net income, or franchise tax (imposed in lieu of such net
income tax), of such Lender or its applicable lending office, branch, or
any affiliate thereof));
(b) 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
(c) shall impose on such Lender any other condition (excluding any
tax of any kind whatsoever);
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, upon notice to the Borrower from such Lender,
through the Agent, in accordance herewith, the Borrower shall be obligated to
promptly pay such Lender, upon its demand, any additional amounts necessary to
compensate such Lender for such increased cost or reduced amount receivable,
provided that, in any such case, the Borrower may elect to convert the
- --------
Eurodollar Loans made by such Lender hereunder to Base Rate Loans by giving the
Agent at least one Business Day's notice of such election, in which case the
Borrower shall promptly pay to such Lender, upon demand, without duplication,
such amounts, if any, as may be required pursuant to Section 3.11. If any
Lender becomes entitled to claim any additional amounts pursuant to this
subsection, it shall provide prompt notice thereof to the Borrower, through the
Agent, certifying (x) that one of the events described in this paragraph (a) has
occurred and describing in reasonable detail the nature of such event, (y) as to
the increased cost or reduced amount resulting from such event and (z) as to the
additional amount demanded by such Lender and a reasonably detailed explanation
of the calculation thereof. Such a certificate as to any additional amounts
payable pursuant to this subsection submitted by such Lender, through the Agent,
to the Borrower shall be conclusive and binding on the parties hereto in the
absence of manifest error. This covenant shall survive the termination of this
Credit Agreement and the payment of the Loans and all other amounts payable
hereunder.
3.10 Taxes.
-----
(a) Except as provided below in this subsection, all payments made by the
Borrower under this Credit 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, charges, fees,
deductions or withholdings, now or hereafter imposed, levied,
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collected, withheld or assessed by any court, or governmental body, agency or
other official, excluding taxes measured by or imposed upon the overall net
income of any Lender or its applicable lending office, or any branch or
affiliate thereof, and all franchise taxes, branch taxes, taxes on doing
business or taxes on the overall capital or net worth of any Lender or its
applicable lending office, or any branch or affiliate thereof, in each case
imposed in lieu of net income taxes, imposed: (i) by the jurisdiction under the
laws of which such Lender, applicable lending office, branch or affiliate is
organized or is located, or in which its principal executive office is located,
or any nation within which such jurisdiction is located or any political
subdivision thereof; or (ii) by reason of any connection between the
jurisdiction imposing such tax and such Lender, applicable lending office,
branch or affiliate other than a connection arising solely from such Lender
having executed, delivered or performed its obligations, or received payment
under or enforced, this Credit Agreement or any Notes. 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
Agent or any Lender hereunder or under any Notes, (A) the amounts so payable to
the Agent or such Lender shall be increased to the extent necessary to yield to
the Agent or such Lender (after payment of all Non-Excluded Taxes) interest or
any such other amounts payable hereunder at the rates or in the amounts
specified in this Credit Agreement and any Notes, provided, however, that the
Borrower shall be entitled to deduct and withhold any Non-Excluded Taxes and
shall not be required to increase any such amounts payable to any Lender that is
not organized under the laws of the United States of America or a state thereof
if such Lender fails to comply with the requirements of paragraph (b) of this
subsection whenever any Non-Excluded Taxes are payable by the Borrower, and (B)
as promptly as possible thereafter the Borrower shall send to the Agent for its
own account or for the account of such Lender, as the case may be, a certified
copy of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Agent the required
receipts or other required documentary evidence, the Borrower shall indemnify
the Agent and the Lenders for any incremental taxes, interest or penalties that
may become payable by the Agent or any Lender as a result of any such failure.
The agreements in this subsection shall survive the termination of this Credit
Agreement and the payment of the Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(X)(i) on or before the date of any payment by the Borrower under this
Credit Agreement or Notes to such Lender, deliver to the Borrower and the
Agent (A) two (2) duly completed copies of United States Internal Revenue
Service Form 1001 or 4224, or successor applicable form, as the case may
be, certifying that it is entitled to receive payments under this Credit
Agreement and any Notes without deduction or withholding of any United
States federal income taxes and (B) an Internal Revenue Service Form W-8 or
W-9, or successor applicable form, as the case may be, certifying that it
is entitled to an exemption from United States backup withholding tax;
(ii) deliver to the Borrower and the Agent two (2) further copies of
any such form or certification on or before the date that any such form or
certification expires or
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becomes obsolete and after the occurrence of any event requiring a change
in the most recent form previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Borrower or
the Agent; or
(Y) in the case of any such Lender that is not a "bank" within the
meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (i) represent
to the Borrower (for the benefit of the Borrower and the Agent) that it is
not a bank within the meaning of Section 881(c)(3)(A) of the Internal
Revenue Code, (ii) agree to furnish to the Borrower on or before the date
of any payment by the Borrower, with a copy to the Agent two (2) accurate
and complete original signed copies of Internal Revenue Service Form W-8,
or successor applicable form certifying to such Lender's legal entitlement
at the date of such certificate to an exemption from U.S. withholding tax
under the provisions of Section 881(c) of the Internal Revenue Code with
respect to payments to be made under this Credit Agreement and any Notes
(and to deliver to the Borrower and the Agent two (2) further copies of
such form on or before the date it expires or becomes obsolete and after
the occurrence of any event requiring a change in the most recently
provided form and, if necessary, obtain any extensions of time reasonably
requested by the Borrower or the Agent for filing and completing such
forms), and (iii) agree, to the extent legally entitled to do so, upon
reasonable request by the Borrower, to provide to the Borrower (for the
benefit of the Borrower and the Agent) such other forms as may be
reasonably required in order to establish the legal entitlement of such
Lender to an exemption from withholding with respect to payments under this
Credit Agreement and any Notes;
unless in any such case any change in treaty, law or regulation has occurred
after the date such Person becomes a Lender hereunder which renders all such
forms inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises the
Borrower and the Agent. Each Person that shall become a Lender or a participant
of a Lender pursuant to Section 11.3 shall, upon the effectiveness of the
related transfer, be required to provide all of the forms, certifications and
statements required pursuant to this subsection, provided that in the case of a
--------
participant of a Lender the obligations of such participant of a Lender pursuant
to this subsection (b) shall be determined as if the participant of a Lender
were a Lender except that such participant of a Lender shall furnish all such
required forms, certifications and statements to the Lender from which the
related participation shall have been purchased.
3.11 Indemnity.
---------
The Borrower promises to defend, indemnify and hold each Lender harmless
from any loss or expense which such Lender may sustain or incur (other than
through such Lender's gross negligence or willful misconduct) as a 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 Credit Agreement,
(b) default by the Borrower in making any prepayment of a Eurodollar Loan after
the Borrower has given a notice thereof in accordance with the provisions of
this Credit Agreement or (c) the making of a
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prepayment of Eurodollar Loans on a day which is not the last day of an Interest
Period with respect thereto. With respect to Eurodollar Loans, such
indemnification may include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
the applicable 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, however, the Applicable Percentage included therein, if
any) 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. The covenants of the Borrower set forth in this Section 3.11 shall
survive the termination of this Credit Agreement and the payment of the Loans
and all other amounts payable hereunder.
3.12 Pro Rata Treatment.
------------------
Except to the extent otherwise provided herein:
(a) Loans. Each Revolving Loan, each payment or prepayment of principal of
-----
any Revolving Loan (other than outstanding Swingline Loans) or reimbursement
obligations arising from drawings under Letters of Credit, each payment of
interest on the Revolving Loans or reimbursement obligations arising from
drawings under Letters of Credit, each payment of Commitment Fees, each payment
of the Letter of Credit Fee, each reduction of the Revolving Committed Amount
and each conversion or extension of any Revolving Loan (other than Swingline
Loans), shall be allocated pro rata among the Revolving Lenders in accordance
with the respective Revolving Commitment Percentages. With respect to the Term
Loan, each payment or prepayment of principal on the Term Loan, each payment of
interest thereon, and each conversion or extension of any Loan comprising the
Term Loan, shall be allocated pro rata among the Term Lenders in accordance with
the respective principal amounts of their respective Term Loan Commitment
Percentages.
(b) Advances. No Lender shall be responsible for the failure or delay by
--------
any other Lender in its obligation to make its ratable share of a borrowing
hereunder; provided, however, that the failure of any Lender to fulfill its
-------- -------
obligations hereunder shall not relieve any other Lender of its obligations
hereunder. Unless the 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 ratable share of such borrowing available to the Agent, the Agent
may assume that such Lender is making such amount available to the Agent, and
the Agent may, in reliance upon such assumption, make available to the Borrower
a corresponding amount. If such amount is not made available to the Agent by
such Lender within the time period specified therefor hereunder, such Lender
shall pay to the Agent, on demand, such amount with interest thereon at a rate
equal to the Federal Funds Rate for a period of two (2) Business Days, and
thereafter at the Base Rate, for the period until such Lender makes such amount
immediately available to the Agent. If such Lender does not pay such amounts to
the Agent forthwith upon demand, the Agent may notify the Borrower and request
the Borrower to immediately pay such amount to the Agent with interest at the
Base Rate. A certificate
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of the Agent submitted to any Lender with respect to any amounts owing under
this subsection shall be conclusive in the absence of manifest error.
3.13 Sharing of Payments.
-------------------
The Lenders agree among themselves that, in the event that any Lender shall
obtain payment in respect of any Loan, LOC Obligations or any other obligation
owing to such Lender under this Credit Agreement through the exercise of a right
of setoff, banker's lien or counterclaim, or pursuant to a secured claim under
Section 506 of Title 11 of the United States Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law or otherwise, or by
any other means, in excess of its pro rata share of such payment as provided for
in this Credit Agreement, such Lender shall promptly purchase from the other
Lenders a participation in such Loans, LOC Obligations and other obligations in
such amounts, and make such other adjustments from time to time, as shall be
equitable to the end that all Lenders share such payment in accordance with
their respective ratable shares as provided for in this Credit Agreement. The
Lenders further agree among themselves that if payment to a Lender obtained by
such Lender through the exercise of a right of setoff, banker's lien,
counterclaim or other event as aforesaid shall be rescinded or must otherwise be
restored, each Lender which shall have shared the benefit of such payment shall,
by repurchase of a participation theretofore sold, return its share of that
benefit (together with its share of any accrued interest payable with respect
thereto) to each Lender whose payment shall have been rescinded or otherwise
restored. The Borrower agrees that any Lender so purchasing such a
participation may, to the fullest extent permitted by law, exercise all rights
of payment, including setoff, banker's lien or counterclaim, with respect to
such participation as fully as if such Lender were a holder of such Loan, LOC
Obligations or other obligation in the amount of such participation. Except as
otherwise expressly provided in this Credit Agreement, if any Lender or the
Agent shall fail to remit to the Agent or any other Lender an amount payable by
such Lender or the Agent to the Agent or such other Lender pursuant to this
Credit Agreement on the date when such amount is due, such payments shall be
made together with interest thereon for each date from the date such amount is
due until the date such amount is paid to the Agent or such other Lender at a
rate per annum equal to the Federal Funds Rate. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured claim
in lieu of a setoff to which this Section 3.13 applies, such Lender shall, to
the extent practicable, exercise its rights in respect of such secured claim in
a manner consistent with the rights of the Lenders under this Section 3.13 to
share in the benefits of any recovery on such secured claim.
3.14 Payments, Computations, Etc.
----------------------------
(a) Except as otherwise specifically provided herein, all payments
hereunder shall be made to the Agent in Dollars in immediately available funds,
without setoff, deduction, counterclaim or withholding of any kind, at the
Agent's office specified in Section 11.1 not later than 2:00 P.M. (Charlotte,
North Carolina time) on the date when due. Payments received after such time
shall be deemed to have been received on the next succeeding Business Day. The
Agent may (but shall not be obligated to) debit the amount of any such payment
which is not made by such time to any ordinary deposit account of the Borrower
maintained with the Agent (with notice
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<PAGE>
to the Borrower). The Borrower shall, at the time it makes any payment under
this Credit Agreement, specify to the Agent the Loans, LOC Obligations, Fees,
interest or other amounts payable by the Borrower hereunder to which such
payment is to be applied (and in the event that it fails so to specify, or if
such application would be inconsistent with the terms hereof, the Agent shall
distribute such payment to the Lenders in such manner as the Agent may determine
to be appropriate in respect of obligations owing by the Borrower hereunder,
subject to the terms of Section 3.12(a)). The Agent will distribute such
payments to such Lenders, if any such payment is received prior to 2:00 P.M.
(Charlotte, North Carolina time) on a Business Day in like funds as received
prior to the end of such Business Day and otherwise the Agent will distribute
such payment to such Lenders on the next succeeding Business Day. Whenever any
payment hereunder shall be stated to be due on a day which is not a Business
Day, the due date thereof shall be extended to the next succeeding Business Day
(subject to accrual of interest and Fees for the period of such extension),
except that in the case of Eurodollar Loans, if the extension would cause the
payment to be made in the next following calendar month, then such payment shall
instead be made on the next preceding Business Day. Except as expressly provided
otherwise herein, all computations of interest and fees shall be made on the
basis of the actual number of days elapsed over a year of 360 days, except with
respect to computation of interest on Base Rate Loans and Swingline Loans which
(unless the Base Rate is determined by reference to the Federal Funds Rate)
shall be calculated based on a year of 365 or 366 days, as appropriate. Interest
shall accrue from and include the date of borrowing, but exclude the date of
payment.
(b) Allocation of Payments After Event of Default. Notwithstanding any
---------------------------------------------
other provisions of this Credit Agreement to the contrary, after the occurrence
and during the continuance of an Event of Default, all amounts collected or
received by the Agent or any Lender on account of the Obligations or any other
amounts outstanding under any of the Credit Documents shall be paid over or
delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs and
expenses (including without limitation reasonable attorneys' fees) of the
Agent in connection with enforcing the rights of the Lenders under the
Credit Documents;
SECOND, to payment of any fees owed to the Agent;
THIRD, to the payment of all reasonable out-of-pocket costs and
expenses (including without limitation, reasonable attorneys' fees) of each
of the Lenders in connection with enforcing its rights under the Credit
Documents or otherwise with respect to the Obligations owing to such
Lender;
FOURTH, to the payment of all accrued interest and fees on or in
respect of the Obligations;
FIFTH, to the payment of the outstanding principal amount of the
Obligations (including the payment or cash collateralization of the
outstanding LOC Obligations);
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<PAGE>
SIXTH, to all other Obligations and other obligations which shall have
become due and payable under the Credit Documents or otherwise and not
repaid pursuant to clauses "FIRST" through "FIFTH" above; and
SEVENTH, to the payment of the surplus, if any, to whoever may be
lawfully entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; and (ii) each of the Lenders shall receive an amount equal
to its pro rata share (based on the proportion that the then outstanding
Obligations held by such Lender bears to the aggregate then outstanding
Obligations) of amounts available to be applied pursuant to clauses "THIRD",
"FOURTH", "FIFTH" and "SIXTH" above; and (iii) to the extent that any amounts
available for distribution pursuant to clause "FIFTH" above are attributable to
the issued but undrawn amount of outstanding Letters of Credit, such amounts
shall be held by the Agent in a cash collateral account and applied (A) first,
to reimburse the Issuing Lender for any drawings under such Letters of Credit
and (B) then, following the expiration of all Letters of Credit, to all other
obligations of the types described in clauses "FIFTH" and "SIXTH" above in the
manner provided in this Section 3.14(b).
3.15 Evidence of Debt.
----------------
(a) Each Lender shall maintain an account or accounts evidencing each Loan
made by such Lender to the Borrower from time to time, including the amounts of
principal and interest payable and paid to such Lender from time to time under
this Credit Agreement. Each Lender will make reasonable efforts to maintain the
accuracy of its account or accounts and to promptly update its account or
accounts from time to time, as necessary.
(b) The Agent shall maintain the Register pursuant to Section 11.3(c)
hereof, and a subaccount for each Lender, in which Register and subaccounts
(taken together) shall be recorded (i) the amount, type and Interest Period of
each such Loan hereunder, (ii) the amount of any principal or interest due and
payable or to become due and payable to each Lender hereunder and (iii) the
amount of any sum received by the Agent hereunder from or for the account of the
Borrower and each Lender's share thereof. The Agent will make reasonable
efforts to maintain the accuracy of the subaccounts referred to in the preceding
sentence and to promptly update such subaccounts from time to time, as
necessary.
(c) The entries made in the accounts, Register and subaccounts maintained
pursuant to subsection (b) of this Section 3.15 (and, if consistent with the
entries of the Agent, subsection (a)) shall be prima facie evidence of the
existence and amounts of the obligations of the Borrower therein recorded;
provided, however, that the failure of any Lender or the Agent to maintain any
- -------- -------
such account, such Register or such subaccount, as applicable, or any error
therein, shall not in any manner affect the obligation of the Borrower to repay
the Loans made by such Lender in accordance with the terms hereof.
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SECTION 4
GUARANTY
---------
4.1 The Guarantee.
-------------
Each of the Guarantors hereby jointly and severally guarantees to each
Lender, to each Affiliate of a Lender that enters into a Hedging Agreement and
to the Agent as hereinafter provided the prompt payment of the Guaranteed
Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration, a mandatory cash collateralization or otherwise)
strictly in accordance with the terms thereof. The Guarantors hereby further
agree that if any of the Guaranteed Obligations are not paid in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration, as
mandatory cash collateralization or otherwise), the Guarantors will, jointly and
severally, promptly pay the same, without any demand or notice whatsoever, and
that in the case of any extension of time of payment or renewal of any of the
Guaranteed Obligations, the same will be promptly paid in full when due (whether
at extended maturity, as a mandatory prepayment, by acceleration or otherwise)
in accordance with the terms of such extension or renewal.
Notwithstanding any provision to the contrary contained herein or in any
other of the Credit Documents or Hedging Agreements, to the extent the
obligations of a Guarantor shall be adjudicated to be invalid or unenforceable
for any reason (including, without limitation, because of any applicable state
or federal law relating to fraudulent conveyances or transfers) then the
obligations of each Guarantor hereunder shall be limited to the maximum amount
that is permissible under applicable law (whether federal or state and
including, without limitation, the Bankruptcy Code).
4.2 Obligations Unconditional.
-------------------------
The obligations of the Guarantors under Section 4.1 hereof are joint and
several, absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Credit Documents or Hedging
Agreements, or any other agreement or instrument referred to therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever which might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 4.2 that the obligations of the
Guarantors hereunder shall be absolute and unconditional under any and all
circumstances. Each Guarantor agrees that such Guarantor shall have no right of
subrogation, indemnity, reimbursement or contribution against the Borrower or
any other Guarantor of the Guaranteed Obligations for amounts paid under this
Guaranty until such time as the Lenders (and any Affiliates of Lenders entering
into Hedging Agreements) have been paid in full, all Commitments under the
Credit Agreement have been terminated and no Person or Governmental Authority
shall have any right to request any return or reimbursement of funds from the
Lenders in connection with monies received under the Credit Documents or Hedging
Agreements. Without limiting the generality of the foregoing, it is agreed
that, to the fullest extent permitted by law, the
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occurrence of any one or more of the following shall not alter or impair the
liability of any Guarantor hereunder which shall remain absolute and
unconditional as described above:
(i) at any time or from time to time, without notice to any Guarantor,
the time for any performance of or compliance with any of the Guaranteed
Obligations shall be extended, or such performance or compliance shall be
waived;
(ii) any of the acts mentioned in any of the provisions of any of the
Credit Documents, any Hedging Agreement or any other agreement or
instrument referred to in the Credit Documents or Hedging Agreements shall
be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under any of the
Credit Documents, any Hedging Agreement or any other agreement or
instrument referred to in the Credit Documents or Hedging Agreements shall
be waived or any other guarantee of any of the Guaranteed Obligations or
any security therefor shall be released or exchanged in whole or in part or
otherwise dealt with;
(iv) any Lien granted to, or in favor of, the Agent or any Lender or
Lenders as security for any of the Guaranteed Obligations shall fail to
attach or be perfected; or
(v) any of the Guaranteed Obligations shall be determined to be void
or voidable (including, without limitation, for the benefit of any creditor
of any Guarantor) or shall be subordinated to the claims of any Person
(including, without limitation, any creditor of any Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Agent or any Lender exhaust any right,
power or remedy or proceed against any Person under any of the Credit Documents,
any Hedging Agreement or any other agreement or instrument referred to in the
Credit Documents or Hedging Agreements, or against any other Person under any
other guarantee of, or security for, any of the Guaranteed Obligations.
4.3 Reinstatement.
-------------
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Guaranteed Obligations is rescinded
or must be otherwise restored by any holder of any of the Guaranteed
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, fees and expenses of counsel) incurred by the
Agent or such Lender in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law.
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4.4 Certain Additional Waivers.
--------------------------
Without limiting the generality of the provisions of this Section 4, each
Guarantor hereby specifically waives the benefits of N.C. Gen. Stat. (S)(S) 26-7
through 26-9, inclusive. Each Guarantor further agrees that such Guarantor
shall have no right of recourse to security for the Guaranteed Obligations,
except through the exercise of the rights of subrogation pursuant to Section
4.2.
4.5 Remedies.
--------
The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Agent and the Lenders, on the
other hand, the Guaranteed Obligations may be declared to be forthwith due and
payable as provided in Section 9.2 hereof (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Section 9.2)
for purposes of Section 4.1 hereof notwithstanding any stay, injunction or other
prohibition preventing such declaration (or preventing the Guaranteed
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or the Guaranteed Obligations
being deemed to have become automatically due and payable), the Guaranteed
Obligations (whether or not due and payable by any other Person) shall forthwith
become due and payable by the Guarantors for purposes of said Section 4.1.
4.6 Rights of Contribution.
----------------------
The Guarantors hereby agree, as among themselves, that if any Guarantor
shall become an Excess Funding Guarantor (as defined below), each other
Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the
succeeding provisions of this Section 4.6), pay to such Excess Funding Guarantor
an amount equal to such Guarantor's Pro Rata Share (as defined below and
determined, for this purpose, without reference to the properties, assets,
liabilities and debts of such Excess Funding Guarantor) of such Excess Payment
(as defined below). The payment obligation of any Guarantor to any Excess
Funding Guarantor under this Section 4.6 shall be subordinate and subject in
right of payment to the prior payment in full of the obligations of such
Guarantor under the other provisions of this Section 4, and such Excess Funding
Guarantor shall not exercise any right or remedy with respect to such excess
until payment and satisfaction in full of all of such obligations. For purposes
hereof, (i) "Excess Funding Guarantor" shall mean, in respect of any obligations
------------------------
arising under the other provisions of this Section 4 (hereafter, the "Guarantied
----------
Obligations"), a Guarantor that has paid an amount in excess of its Pro Rata
- -----------
Share of the Guarantied Obligations; (ii) "Excess Payment" shall mean, in
--------------
respect of any Guarantied Obligations, the amount paid by an Excess Funding
Guarantor in excess of its Pro Rata Share of such Guarantied Obligations; and
(iii) "Pro Rata Share", for the purposes of this Section 4.6, shall mean, for
--------------
any Guarantor, the ratio (expressed as a percentage) of (a) the amount by which
the aggregate present fair saleable value of all of its assets and properties
exceeds the amount of all debts and liabilities of such Guarantor (including
contingent, subordinated, unmatured, and unliquidated liabilities, but excluding
the obligations of such Guarantor hereunder) to (b) the amount by which the
aggregate present fair saleable value of all assets and other properties of the
Borrower and all of the Guarantors exceeds the amount of all of the debts and
liabilities (including
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contingent, subordinated, unmatured, and unliquidated liabilities, but excluding
the obligations of the Borrower and the Guarantors hereunder) of the Borrower
and all of the Guarantors, all as of the Closing Date (if any Guarantor becomes
a party hereto subsequent to the Closing Date, then for the purposes of this
Section 4.6 such subsequent Guarantor shall be deemed to have been a Guarantor
as of the Closing Date and the information pertaining to, and only pertaining
to, such Guarantor as of the date such Guarantor became a Guarantor shall be
deemed true as of the Closing Date).
4.7 Continuing Guarantee.
--------------------
The guarantee in this Section 4 is a continuing guarantee, and shall apply
to all Guaranteed Obligations whenever arising.
SECTION 5
CONDITIONS
----------
5.1 Conditions to Closing.
---------------------
This Credit Agreement shall become effective, and the initial Extensions of
Credit may be made, upon the satisfaction of the following conditions precedent:
(a) Execution of Credit Agreement and Credit Documents. Receipt by the
--------------------------------------------------
Agent of (i) multiple counterparts of this Credit Agreement, (ii) a Revolving
Note for each Revolving Lender, (iii) a Term Note for each Term Lender, (iv)
multiple counterparts of the Pledge Agreement, the Security Agreement and the
Mortgages, and (iv) UCC financing statements relating to the Pledge Agreement,
Security Agreement and the Mortgages, if any, in each case executed by a duly
authorized officer of each party thereto and in each case conforming to the
requirements of this Credit Agreement.
(b) Legal Opinions. Receipt of multiple counterparts of opinions of
--------------
counsel for the Credit Parties relating to the Credit Documents and the
transactions contemplated herein, in form and substance satisfactory to the
Agent.
(c) Financial Information. Receipt of financial information regarding the
---------------------
Borrower and its Subsidiaries, as may be requested by, and in each case in form
and substance satisfactory to the Agent and the Lenders.
(d) Year 2000 Problem. Receipt of evidence satisfactory to the Agent that
-----------------
the (i) Credit Parties and their Subsidiaries are taking all necessary and
appropriate steps to ascertain the extent of, and to quantify and successfully
address, business and financial risks facing the Credit Parties and Subsidiaries
as a result of what is commonly referred to as the Year 2000 Problem, and (ii)
the Credit Parties' and their Subsidiaries' material computer applications will,
on a timely basis, adequately address the Year 2000 Problem in all material
respects.
49
<PAGE>
(e) Uniform Commercial Code Searches. Searches of Uniform Commercial Code
--------------------------------
filings in the jurisdiction of the chief executive office of each Credit Party
and each jurisdiction where any Collateral is located or where a filing would
need to be made in order to perfect the Agent's security interest in the
Collateral and copies of the financing statements on file in such jurisdictions
and evidence that no Liens exists other than Permitted Liens.
(f) Absence of Legal Proceedings. The absence of any action, suit,
----------------------------
investigation or proceeding pending in any court or before any arbitrator or
Governmental Authority which could reasonably be expected to have a Material
Adverse Effect.
(g) Corporate Documents. Receipt of the following (or their equivalent)
-------------------
for each of the Credit Parties:
(i) Articles of Incorporation. Copies of the articles of
-------------------------
incorporation or charter documents certified to be true and complete as of
a recent date by the appropriate Governmental Authority of the state of its
incorporation.
(ii) Resolutions. Copies of resolutions of the Board of Directors
-----------
approving and adopting the respective Credit Documents, the transactions
contemplated therein and authorizing execution and delivery thereof,
certified by a secretary or assistant secretary as of the Closing Date to
be true and correct and in force and effect as of such date.
(iii) Bylaws. Copies of the bylaws certified by a secretary or
------
assistant secretary as of the Closing Date to be true and correct and in
force and effect as of such date.
(iv) Good Standing. Copies, where applicable, of (A) certificates
-------------
of good standing, existence or its equivalent certified as of a recent date
by the appropriate Governmental Authorities of the state of incorporation
and each other state in which the failure to so qualify and be in good
standing would have a material adverse effect on the business or operations
in such state and (B) a certificate indicating payment of all corporate
franchise taxes and filing of annual reports certified as of a recent date
by the appropriate governmental taxing authorities.
(v) Officer's Certificate. An officer's certificate for each of the
---------------------
Credit Parties dated as of the Closing Date substantially in the form of
Schedule 5.1(g)(v) with appropriate insertions and attachments.
(h) Fees. Receipt of all fees, if any, owing pursuant to the Agents' Fee
----
Letter, Section 3.5 or otherwise.
(i) Subsection 5.2 Conditions. The conditions specified in Section 5.2
-------------------------
shall be satisfied.
50
<PAGE>
(j) Additional Matters. All other documents and legal matters in
------------------
connection with the transactions contemplated by this Credit Agreement shall be
reasonably satisfactory in form and substance to the Agent.
5.2 Conditions to All Extensions of Credit.
--------------------------------------
The obligation of each Lender to make any Extension of Credit hereunder
(including the initial Extension of Credit to be made hereunder) is subject to
the satisfaction of the following conditions precedent on the date of making
such Extension of Credit:
(a) Representations and Warranties. The representations and warranties
------------------------------
made by the Credit Parties herein or in any other Credit Documents or which are
contained in any certificate furnished at any time under or in connection
herewith shall be true and correct in all material respects on and as of the
date of such Extension of Credit as if made on and as of such date (except for
those which expressly relate to an earlier date).
(b) No Default or Event of 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 to be made on such date unless such Default or Event of
Default shall have been waived in accordance with this Credit Agreement.
(c) Involuntary Bankruptcy or Insolvency. There shall not have been
------------------------------------
commenced against any of the Credit Parties an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or any case, proceeding or other action for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its Property or for the
winding up or liquidation of its affairs, and shall remain undismissed,
undischarged or unbonded.
(d) No Material Adverse Effect. No circumstances, events or conditions
--------------------------
shall have occurred since September 30, 1998 which would have a Material Adverse
Effect.
(e) Additional Conditions to Revolving Loans. If a Revolving Loan is made
----------------------------------------
pursuant to Section 2.1, all conditions set forth therein shall have been
satisfied.
(f) Additional Conditions to Letters of Credit. If a Letter of Credit is
------------------------------------------
issued pursuant to Section 2.2, all conditions set forth therein shall have been
satisfied.
(g) Additional Conditions to Swingline Loans. If a Swingline Loan is made
----------------------------------------
pursuant to Section 2.3, all conditions set forth therein shall have been
satisfied.
(h) Additional Conditions to Term Loans. If a Term Loan is made pursuant
-----------------------------------
to Section 2.4, all conditions set forth therein shall have been satisfied.
Each request for an Extension of Credit (including extensions and
conversions) and each acceptance by the Borrower of an Extension of Credit
(including extensions and conversions)
51
<PAGE>
shall be deemed to constitute a representation and warranty by the Borrower as
of the date of such Extension of Credit that the applicable conditions in
paragraphs (a), (b), (c) and (d), and in (e), (f), (g) or (h) of this subsection
have been satisfied.
SECTION 6
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce the Lenders to enter into this Credit Agreement and to make
Extensions of Credit herein provided for, each of the Credit Parties hereby
represents and warrants to the Agent and to each Lender that:
6.1 Financial Condition.
-------------------
Each of the financial statements described below (copies of which have
heretofore been provided to the Agent for distribution to the Lenders), have
been prepared in accordance with GAAP consistently applied throughout the
periods covered thereby, are complete and correct in all material respects and
present fairly the financial condition and results from operations of the
entities for the periods specified, subject in the case of interim company-
prepared statements to normal year-end adjustments and the absence of footnotes:
(i) an audited consolidated balance sheet of the Consolidated Group
dated as of December 31, 1997, together with related consolidated
statements of income and cash flows certified by PricewaterhouseCoopers,
LLP, certified public accountants; and
(ii) a company-prepared consolidated balance sheet of the Consolidated
Group dated as of September 30, 1998, together with related consolidated
statements of income and cash flows.
6.2 No Changes or Restricted Payments.
---------------------------------
Since the date of the audited financial statements referenced in Section
6.1(i), (a) there has been no circumstance, development or event relating to or
affecting the members of the Consolidated Group which has had or would be
reasonably expected to have a Material Adverse Effect, and (b) except as
permitted herein, no Restricted Payments have been made or declared or are
contemplated by any members of the Consolidated Group.
6.3 Organization; Existence; Compliance with Law.
--------------------------------------------
Each of the members of the Consolidated Group (a) is duly organized,
validly existing in good standing under the laws of the jurisdiction of its
incorporation or organization, (b) has the corporate or other necessary power
and authority, and the legal right to own and operate its property, to lease the
property it operates as lessee and to conduct the business
52
<PAGE>
in which it is currently engaged, (c) is duly qualified 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, other than in such jurisdictions where the failure to be so
qualified and in good standing would not, in the aggregate, 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 would not, in the aggregate, be
reasonably expected to have a Material Adverse Effect.
6.4 Power; Authorization; Enforceable Obligations.
---------------------------------------------
Each of the Credit Parties has the corporate or other necessary power and
authority, and the legal right, to make, deliver and perform the Credit
Documents to which it is a party and has taken all necessary corporate or other
action to authorize the execution, delivery and performance by it of the Credit
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 in connection with acceptance of Extensions of Credit
or the making of the guaranties hereunder or with the execution, delivery or
performance of any Credit Documents by the Credit Parties (other than those
which have been obtained, such filings as are required by the SEC and to fulfill
other reporting requirements with Governmental Authorities) or with the validity
or enforceability of any Credit Document against the Credit Parties (except such
filings as are necessary in connection with the perfection of the Liens created
by such Credit Documents). Each Credit Document to which it is a party
constitutes a legal, valid and binding obligation of such Credit Party
enforceable against such Credit Party in accordance with their respective 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).
6.5 No Legal Bar.
------------
The execution, delivery and performance of the Credit Documents, the
borrowings hereunder and the use of the Extensions of Credit will not violate
any Requirement of Law or any material Contractual Obligation of any member of
the Consolidated Group (except those as to which waivers or consents have been
obtained), and will not result in, or require, the creation or imposition of any
Lien on any of its respective properties or revenues pursuant to any Requirement
of Law or Contractual Obligation other than the Liens arising under or
contemplated in connection with the Credit Documents. No member of the
Consolidated Group is in default under or with respect to any of its Contractual
Obligations in any respect which would reasonably be expected to have a Material
Adverse Effect.
6.6 No Material Litigation.
----------------------
No claim, litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the best knowledge of the
Credit Parties, threatened by or against, any members of the Consolidated Group
or against any of their respective properties or revenues which (a) relate to
the Credit Documents or any of the transactions contemplated hereby or thereby
or (b) if adversely determined, would reasonably be expected to have a Material
Adverse Effect. Set forth on Schedule 6.6 is a summary of all claims,
------------
litigation, investigations and proceedings pending or, to the best knowledge of
the Credit Parties,
53
<PAGE>
threatened by or against the members of the Consolidated Group or against any of
their respective properties or revenues, and none of such actions, individually
or in the aggregate, is reasonably expected to have a Material Adverse Effect.
6.7 No Default.
----------
No Default or Event of Default has occurred and is continuing.
6.8 Ownership of Property; Liens.
----------------------------
Each of members of the Consolidated Group (i) has good record and
marketable title in fee simple to, or a valid leasehold interest in, all its
material real property, and good title to, or a valid leasehold interest in, all
its other material property, and none of such property is subject to any Lien,
except for Permitted Liens and (ii) has obtained all material licenses, permits,
franchises or other authorizations, governmental or private, necessary to the
ownership of its Property and to the conduct of its business.
6.9 Intellectual Property.
---------------------
Each of the members of the Consolidated Group owns, or has the legal right
to use, all trademarks, tradenames, copyrights, technology, know-how and
processes, if any, necessary for each of them to conduct its business as
currently conducted (the "Intellectual Property") except for those the failure
---------------------
to own or have such legal right to use would not be reasonably expected to have
a Material Adverse Effect. No claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property, nor does any
Credit Party know of any such claim, and the use of such Intellectual Property
by the members of the Consolidated Group does not infringe on the rights of any
Person, except for such claims and infringements that, in the aggregate, would
not be reasonably expected to have a Material Adverse Effect.
6.10 No Burdensome Restrictions.
--------------------------
No Requirement of Law or Contractual Obligation of the members of the
Consolidated Group would be reasonably expected to have a Material Adverse
Effect.
6.11 Taxes.
-----
Each of the members of the Consolidated Group has filed or caused to be
filed all United States federal income tax returns and all other material tax
returns which, to the best knowledge of the Credit Parties, are required to be
filed and has paid (a) all taxes shown to be due and payable on said returns or
(b) all taxes shown to be due and payable on any assessments of which it has
received notice made against it or any of its Property and all other taxes, fees
or other charges imposed on it or any of its Property by any Governmental
Authority (other than any (i) taxes, fees or other charges with respect to which
the failure to pay, in the aggregate, would not have a Material Adverse Effect
or (ii) taxes, fees or other charges the amount or validity of which are
54
<PAGE>
currently being contested and with respect to which reserves in conformity with
GAAP have been provided on the books of such Person), and no tax Lien has been
filed, and, to the best knowledge of the Credit Parties, no claim is being
asserted, with respect to any such tax, fee or other charge.
6.12 ERISA
-----
Except as would not reasonably be expected to have a Material Adverse
Effect:
(a) During the five-year period prior to the date on which this
representation is made or deemed made: (i) no ERISA Event has occurred, and, to
the best knowledge of the Credit Parties, no event or condition has occurred or
exists as a result of which any ERISA Event could reasonably be expected to
occur, with respect to any Plan; (ii) no "accumulated funding deficiency," as
such term is defined in Section 302 of ERISA and Section 412 of the Internal
Revenue Code, whether or not waived, has occurred with respect to any Plan;
(iii) each Plan has been maintained, operated, and funded in compliance with its
own terms and in material compliance with the provisions of ERISA, the Internal
Revenue Code, and any other applicable federal or state laws; and (iv) no lien
in favor of the PBGC or a Plan has arisen or is reasonably likely to arise on
account of any Plan.
(b) The actuarial present value of all "benefit liabilities" (as defined in
Section 4001(a)(16) of ERISA), whether or not vested, under each Single Employer
Plan, as of the last annual valuation date prior to the date on which this
representation is made or deemed made (determined, in each case, in accordance
with Financial Accounting Standards Board Statement 87, utilizing the actuarial
assumptions used in such Plan's most recent actuarial valuation report), did not
exceed as of such valuation date the fair market value of the assets of such
Plan.
(c) No member of the Consolidated Group nor any ERISA Affiliate has
incurred, or, to the best knowledge of the Credit Parties, could be reasonably
expected to incur, any withdrawal liability under ERISA to any Multiemployer
Plan or Multiple Employer Plan. No member of the Consolidated Group nor any
ERISA Affiliate would become subject to any withdrawal liability under ERISA if
any member of the Consolidated Group or any ERISA Affiliate were to withdraw
completely from all Multiemployer Plans and Multiple Employer Plans as of the
valuation date most closely preceding the date on which this representation is
made or deemed made. No member of the Consolidated Group nor any ERISA Affiliate
has received any notification that any Multiemployer Plan is in reorganization
(within the meaning of Section 4241 of ERISA), is insolvent (within the meaning
of Section 4245 of ERISA), or has been terminated (within the meaning of Title
IV of ERISA), and no Multiemployer Plan is, to the best knowledge of the Credit
Parties, reasonably expected to be in reorganization, insolvent, or terminated.
(d) No prohibited transaction (within the meaning of Section 406 of ERISA
or Section 4975 of the Internal Revenue Code) or breach of fiduciary
responsibility has occurred with respect to a Plan which has subjected or may
subject any member of the Consolidated Group or any ERISA Affiliate to any
liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of
the Internal Revenue Code, or under any agreement or other instrument pursuant
to which any member of the Consolidated Group or any ERISA Affiliate has agreed
or is required to indemnify any person against any such liability.
55
<PAGE>
(e) No member of the Consolidated Group nor any ERISA Affiliates has any
material liability with respect to "expected post-retirement benefit
obligations" within the meaning of the Financial Accounting Standards Board
Statement 106. Each Plan which is a welfare plan (as defined in Section 3(1) of
ERISA) to which Sections 601-609 of ERISA and Section 4980B of the Internal
Revenue Code apply has been administered in compliance in all material respects
of such sections.
6.13 Governmental Regulations, Etc.
-----------------------------
(a) No part of the proceeds of the Extensions of Credit hereunder will be
used, directly or indirectly, for the purpose of purchasing or carrying any
"margin stock" within the meaning of Regulation U, or for the purpose of
purchasing or carrying or trading in any securities. If requested by any Lender
or the Agent, the Borrower will furnish to the Agent and each Lender a statement
to the foregoing effect in conformity with the requirements of FR Form U-1
referred to in said Regulation U. No indebtedness being reduced or retired out
of the proceeds of the Extensions of Credit hereunder was or will be incurred
for the purpose of purchasing or carrying any margin stock within the meaning of
Regulation U or any "margin security" within the meaning of Regulation T.
"Margin stock" within the meanings of Regulation U does not constitute more than
25% of the value of the consolidated assets of the Borrower and its
Subsidiaries. None of the transactions contemplated by this Credit Agreement
(including, without limitation, the direct or indirect use of the proceeds of
the Loans) will violate or result in a violation of the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended, or regulations
issued pursuant thereto, or Regulation T, U or X.
(b) None of the members of the Consolidated Group is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act or
the Investment Company Act of 1940, each as amended. In addition, none of the
members of the Consolidated Group is (i) an "investment company" registered or
required to be registered under the Investment Company Act of 1940, as amended,
and is not controlled by such a company, or (ii) a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary" of a "holding company", within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
(c) No director, executive officer or principal shareholder of any member
of the Consolidated Group is a director, executive officer or principal
shareholder of any Lender. For the purposes hereof the terms "director",
"executive officer" and "principal shareholder" (when used with reference to any
Lender) have the respective meanings assigned thereto in Regulation O issued by
the Board of Governors of the Federal Reserve System.
6.14 Subsidiaries.
------------
Set forth on Schedule 6.14 are all the Subsidiaries of the Borrower at the
-------------
Closing Date, the jurisdiction of their incorporation and the direct or indirect
ownership interest of the Borrower therein.
56
<PAGE>
6.15 Purpose of Extensions of Credit.
-------------------------------
The Extensions of Credit will be used to refinance existing Funded Debt,
and to finance working capital and other corporate purposes, including
acquisitions permitted hereunder. The Letters of Credit shall be used only for
or in connection with appeal bonds, reimbursement obligations arising in
connection with surety and reclamation bonds, reinsurance, domestic or
international trade transactions and obligations not otherwise aforementioned
relating to transactions entered into by the applicable account party in the
ordinary course of business.
6.16 Environmental Matters.
---------------------
Except as would not reasonably be expected to have a Material Adverse
Effect:
(a) Each of the facilities and properties owned, leased or operated by the
members of the Consolidated Group (the "Subject Properties") and all operations
------------------
at the Subject Properties are in compliance with all applicable Environmental
Laws, and there is no violation of any Environmental Law with respect to the
Subject Properties or the businesses operated by the members of the Consolidated
Group (the "Businesses").
----------
(b) None of the members of the Consolidated Group has received any written
or verbal notice of, or inquiry from any Governmental Authority regarding, any
violation, alleged violation, non-compliance, liability or potential liability
regarding environmental matters or compliance with Environmental Laws with
regard to any of the Subject Properties or the Businesses, nor does any member
of the Consolidated Group have knowledge or reason to believe that any such
notice will be received or is being threatened.
(c) Materials of Environmental Concern have not been transported or
disposed of from the Subject Properties, or generated, treated, stored or
disposed of at, on or under any of the Subject Properties or any other location,
in each case by or on behalf any members of the Consolidated Group in violation
of, or in a manner that would be reasonably likely to give rise to liability
under, any applicable Environmental Law.
(d) No judicial proceeding or governmental or administrative action is
pending or, to the best knowledge of any Credit Party, threatened, under any
Environmental Law to which any member of the Consolidated Group is or 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
any member of the Consolidated Group, the Subject Properties or the Businesses.
(e) There has been no Release or, threat of Release of Materials of
Environmental Concern, arising from or related to the operations (including,
without limitation, disposal) of any member of the Consolidated Group in
connection with the Subject Properties or otherwise in connection with the
Businesses, in violation of or in amounts or in a manner that could give rise to
liability under Environmental Laws.
57
<PAGE>
6.17 Year 2000 Compliance.
--------------------
The Borrower has (i) initiated a review and assessment of all areas within
its and each of its Subsidiaries' business and operations that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
-----------------
applications used by the Borrower or any of its Subsidiaries may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999), (ii) developed a plan and
timeline for addressing the Year 2000 Problem on a timely basis, and (iii) to
date, implemented that plan in accordance with that timetable. Based on the
foregoing, the Borrower believes that all computer applications that are
material to its or any of its Subsidiaries' business and operations are
reasonably expected on a timely basis to be able to perform properly date-
sensitive functions for all dates before and after January 1, 2000 (that is, be
"Year 2000 Compliant"), except to the extent that a failure to do so could not
-------------------
reasonably be expected to have a Material Adverse Effect.
SECTION 7
AFFIRMATIVE COVENANTS
---------------------
Each of the Credit Parties covenants and agrees that on the Closing Date,
and so long as this Credit Agreement is in effect and until the Commitments have
been terminated, no Obligations remain outstanding and all amounts owing
hereunder or in connection herewith have been paid in full, each of the members
of the Consolidated Group party hereto shall:
7.1 Financial Statements.
--------------------
Furnish, or cause to be furnished, to the Agent and the Lenders:
(a) Audited Financial Statements. As soon as available, but in any
----------------------------
event within 95 days after the end of each fiscal year, an audited
consolidated balance sheet of the Consolidated Group as of the end of the
fiscal year and the related consolidated statements of income, retained
earnings, shareholders' equity and cash flows for the year, audited by
independent certified public accountants of nationally recognized standing
acceptable to the Required Lenders in their reasonable discretion, setting
forth in each case in comparative form the figures for the previous year,
reported without a "going concern" or like qualification or exception, or
qualification indicating that the scope of the audit was inadequate to
permit such independent certified public accountants to certify such
financial statements without such qualification.
(b) Borrower-Prepared Financial Statements. As soon as available, but
--------------------------------------
in any event
(i) within 50 days after the end of each of the first three fiscal
quarters, a company-prepared consolidated balance sheet of the
Consolidated Group as of the end of the quarter and related company-
prepared consolidated statements of
58
<PAGE>
income, retained earnings, shareholders' equity and cash flows for
such quarterly period and for the fiscal year to date;
(ii) within 90 days after the end of the fourth fiscal quarter, a
company-prepared consolidating balance sheet of the Consolidated Group
as of the end of the quarter and related company-prepared
consolidating statements of income, retained earnings, shareholders'
equity and cash flows for such quarterly period and for the fiscal
year to date;
(iii) within 45 days following the end of each fiscal year, an
annual business plan and budget for the members of the Consolidated
Group, containing, among other things, pro forma financial statements
for such current fiscal year;
(iv) within 45 days following the end of each fiscal quarter, an
accounts receivable aging and listing certified by the chief financial
officer of the Borrower to be true and correct as of the date thereof
and in form reasonably satisfactory to the Agent,
in each case setting forth in comparative form the consolidated figures for
the corresponding period or periods of the preceding fiscal year or the
portion of the fiscal year ending with such period, as applicable, in each
case subject to normal recurring year-end audit adjustments.
All such financial statements shall be complete and correct in all material
respects (subject, in the case of interim statements, to normal recurring year-
end audit adjustments) and shall be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected
therein and further accompanied by a description of, and an estimation of the
effect on the financial statements on account of, a change in the application of
accounting principles as provided in Section 1.3.
7.2 Certificates; Other Information.
-------------------------------
Furnish, or cause to be furnished, to the Agent and the Lenders:
(a) Accountant's Certificate and Reports. Concurrently with the
------------------------------------
delivery of the financial statements referred to in Section 7.1(a) above, 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,
except as specified in such certificate.
(b) Officer's Compliance Certificate. Concurrently with the delivery
--------------------------------
of the financial statements referred to in Sections 7.1(a) and 7.1(b)
above, a certificate of a Responsible Officer stating that, to the best of
such Responsible Officer's knowledge and belief, (i) the financial
statements fairly present in all material respects the financial condition
of the parties covered by such financial statements, (ii) during such
period the
59
<PAGE>
members of the Consolidated Group have observed or performed in all
material respects the covenants and other agreements hereunder and under
the other Credit Documents relating to them, and satisfied in all material
respects the conditions, contained in this Credit Agreement to be observed,
performed or satisfied by them, and (iii) such Responsible Officer has
obtained no knowledge of any Default or Event of Default except as
specified in such certificate. Such certificate shall include the
calculations required to indicate compliance with Section 7.9. A form of
officer's certificate is attached as Schedule 7.2(b).
---------------
(c) Accountants' Reports. Promptly upon receipt, a copy of any final
--------------------
(as distinguished from a preliminary or discussion draft) "management
letter" or other similar report submitted by independent accountants or
financial consultants to the members of the Consolidated Group in
connection with any annual, interim or special audit.
(d) Public Information. Within thirty days after the same are sent,
------------------
copies of all reports (other than those otherwise provided pursuant to
Section 7.1) and other financial information which any member of the
Consolidated Group sends to its public stockholders, and within thirty days
after the same are filed, copies of all financial statements and non-
confidential reports which any member of the Consolidated Group may make
to, or file with, the Securities and Exchange Commission or any successor
or analogous Governmental Authority.
(e) Other Information. Promptly, such additional financial and other
-----------------
information as the Agent, at the request of any Lender, may from time to
time reasonably request.
7.3 Notices.
-------
Give notice to the Agent (which shall promptly transmit such notice to each
Lender) of:
(a) Defaults. Immediately (and in any event within two (2) Business
--------
Days) after any Credit Party knows or has reason to know thereof, the
occurrence of any Default or Event of Default.
(b) Contractual Obligations. Promptly, the occurrence of any default
-----------------------
or event of default under any Contractual Obligation of any member of the
Consolidated Group which would reasonably be expected to have a Material
Adverse Effect.
(c) Legal Proceedings. Promptly, any litigation, or any investigation
-----------------
or proceeding (including without limitation, any environmental proceeding)
known to any member of the Consolidated Group, or any material development
in respect thereof, affecting any member of the Consolidated Group which,
if adversely determined, would reasonably be expected to have a Material
Adverse Effect.
60
<PAGE>
(d) ERISA. Promptly, after any Responsible Officer of the Borrower
-----
knows or has reason to know of (i) any event or condition, including, but
not limited to, any Reportable Event, that constitutes, or might reasonably
lead to, an ERISA Event; (ii) with respect to any Multiemployer Plan, the
receipt of notice as prescribed in ERISA or otherwise of any withdrawal
liability assessed against any of their ERISA Affiliates, or of a
determination that any Multiemployer Plan is in reorganization or insolvent
(both within the meaning of Title IV of ERISA); (iii) the failure to make
full payment on or before the due date (including extensions) thereof of
all amounts which the members of the Consolidated Group or any ERISA
Affiliate are required to contribute to each Plan pursuant to its terms and
as required to meet the minimum funding standard set forth in ERISA and the
Internal Revenue Code with respect; or (iv) any change in the funding
status of any Plan that reasonably could be expected to have a Material
Adverse Effect; together with a description of any such event or condition
or a copy of any such notice and a statement by the chief financial officer
of the Borrower briefly setting forth the details regarding such event,
condition, or notice, and the action, if any, which has been or is being
taken or is proposed to be taken by the Credit Parties with respect
thereto. Promptly upon request, the members of the Consolidated Group
shall furnish the Agent and the Lenders with such additional information
concerning any Plan as may be reasonably requested, including, but not
limited to, copies of each annual report/return (Form 5500 series), as well
as all schedules and attachments thereto required to be filed with the
Department of Labor and/or the Internal Revenue Service pursuant to ERISA
and the Internal Revenue Code, respectively, for each "plan year" (within
the meaning of Section 3(39) of ERISA).
(e) Other. Promptly, any other development or event which a
-----
Responsible Officer of the Borrower determines 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 of the Borrower setting forth details of the occurrence
referred to therein and stating what action the relevant Credit Parties propose
to take with respect thereto.
7.4 Payment of Obligations.
----------------------
Pay, discharge or otherwise satisfy at or before maturity or before they
become delinquent, as the case may be, in accordance with prudent business
practice (subject, where applicable, to specified grace periods) all material
obligations of each member of the Consolidated Group of whatever nature and any
additional costs that are imposed as a result of any failure to so pay,
discharge or otherwise satisfy such obligations, except when the amount or
validity of such obligations and costs is currently being contested in good
faith by appropriate proceedings and reserves, if applicable, in conformity with
GAAP with respect thereto have been provided on the books of the Consolidated
Group, as the case may be.
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7.5 Conduct of Business and Maintenance of Existence.
------------------------------------------------
Continue to engage in business of the same general type as now conducted by
it on the date hereof and similar or related businesses; except as permitted by
Section 8.3, preserve, renew and keep in full force and effect its corporate
existence and take all reasonable action to maintain all rights, privileges,
licenses and franchises necessary or desirable in the normal conduct of its
business; and comply with all Contractual Obligations and Requirements of Law
applicable to it except to the extent that failure to comply therewith would
not, in the aggregate, have a Material Adverse Effect.
7.6 Maintenance of Property; Insurance.
----------------------------------
Keep all material Property useful and necessary in its business in
reasonably good working order and condition (ordinary wear and tear excepted);
maintain with financially sound and reputable insurance companies casualty,
liability and such other insurance (which may include plans of self-insurance)
with such coverage and deductibles, and in such amounts as may be consistent
with prudent business practice and in any event consistent with normal industry
practice (except to any greater extent as may be required by the terms of any of
the other Credit Documents); and furnish to the Agent, upon written request,
full information as to the insurance carried.
7.7 Inspection of Property; Books and Records; Discussions.
------------------------------------------------------
Keep proper books of records and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its businesses and activities; and
permit, during regular business hours and upon reasonable notice by the Agent,
the Agent and its agents and representatives to visit and inspect any of its
Properties and examine and make abstracts (including photocopies) from any of
its books and records (other than materials protected by the attorney-client
privilege and materials which the Credit Parties may not disclose without
violation of a confidentiality obligation binding upon them) at any reasonable
time, and to discuss the business, operations, properties and financial and
other condition of the members of the Consolidated Group with the principal
officers of the members of the Consolidated Group and with their independent
certified public accountants. The cost of the inspection referred to in the
preceding sentence shall be for the account of the Lenders unless an Event of
Default has occurred and is continuing, in which case the cost of such
inspection shall be for the account of the Credit Parties.
7.8 Environmental Laws.
------------------
(a) Comply in all material respects with, and take reasonable actions to
ensure compliance in all material respects by all tenants and subtenants, if
any, with, all applicable Environmental Laws and obtain and comply in all
material respects with and maintain, and take reasonable actions to ensure that
all tenants and subtenants obtain and comply in all material respects with and
maintain, any and all licenses, approvals, notifications, registrations or
permits
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required by applicable Environmental Laws except to the extent that failure to
do so would not reasonably be expected to have a Material Adverse Effect;
(b) Conduct and complete all investigations, studies, sampling and testing,
and all remedial, removal and other actions required under Environmental Laws
and promptly comply in all material respects with all lawful orders and
directives of all Governmental Authorities regarding Environmental Laws except
to the extent that the same are being contested in good faith by appropriate
proceedings and the failure to do or the pendency of such proceedings would not
reasonably be expected to have a Material Adverse Effect; and
(c) Defend, indemnify and hold harmless the Agent and the Lenders, and
their respective employees, agents, officers and directors, from and against any
and all claims, demands, penalties, fines, liabilities, settlements, damages,
costs and expenses of whatever kind or nature known or unknown, contingent or
otherwise, arising out of, or in any way relating to the violation of,
noncompliance with or liability under, any Environmental Law applicable to the
operations of the members of the Consolidated Group or the Subject Properties,
or any orders, requirements or demands of Governmental Authorities related
thereto, including, without limitation, reasonable attorney's and consultant's
fees, investigation and laboratory fees, response costs, court costs and
litigation expenses, except to the extent that any of the foregoing arise out of
the gross negligence or willful misconduct of the party seeking indemnification
therefor. The agreements in this paragraph shall survive repayment of the Loans
and all other amounts payable hereunder, and termination of the Commitments.
7.9 Financial Covenants.
-------------------
Comply with the following financial covenants:
(a) Consolidated Leverage Ratio. As of the end of each fiscal quarter, the
---------------------------
Consolidated Leverage Ratio shall be not greater than 3.0:1.0.
(b) Consolidated Fixed Charge Coverage Ratio. As of the end of each fiscal
----------------------------------------
quarter, the Consolidated Fixed Charge Coverage Ratio shall be not less than
1.75:1.0.
(c) Consolidated Net Worth. As of the end of each fiscal quarter,
----------------------
Consolidated Net Worth shall be not less than the sum of $45,000,000 plus on the
----
last day of each fiscal quarter to occur after the Closing Date, 75% of
Consolidated Net Income for the fiscal quarter then ended, such increases to be
cumulative, plus 100% of the Net Proceeds from Equity Transactions occurring
----
after the Closing Date.
(d) Consolidated Senior Leverage Ratio. As of the end of each fiscal
----------------------------------
quarter, the Consolidated Senior Leverage Ratio shall be not greater than
2.5:1.0.
(e) Capital Expenditures. The aggregate amount of Capital Expenditures for
--------------------
the Consolidated Group will not exceed in any fiscal year an amount equal to the
sum of (a) $6,500,000 (provided such amount shall equal $7,500,000 with respect
to fiscal year 2001) plus
----
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(b) for fiscal years occurring after the current fiscal year, the unused
portions from prior fiscal years beginning with the first fiscal year to occur
after the Closing Date.
7.10 Administrative Fees.
-------------------
Pay to the Agent the Agent's Fees and comply with the other agreements
provided for in the Agent's Fee Letter.
7.11 Additional Guaranties, Stock Pledges and Collateral.
---------------------------------------------------
(a) Domestic Subsidiaries. At any time any Person becomes a Domestic
---------------------
Subsidiary,
the Borrower shall (i) promptly notify the Agent thereof, and promptly cause
such Domestic Subsidiary to become a Guarantor by execution of a Joinder
Agreement, (ii) deliver the stock certificates together with undated stock
transfer powers executed in blank evidencing the pledge of all of the Voting
Stock of such Domestic Subsidiary held by any Credit Party, (iii) deliver with
the Joinder Agreement, supporting resolutions, incumbency certificates,
corporate formation and organizational documentation and opinions of counsel as
the Agent may reasonably request, (iv) cause such Domestic Subsidiary to grant
to the Agent a first-priority perfected security interest in all Collateral in
which it has an interest and in all owned or leased real property (to the extent
deemed material by the Agent) and (v) cause such Domestic Subsidiary to deliver
stock certificates and related pledge agreements or pledge joinder agreements
evidencing the pledge of all of the Voting Stock held by such Domestic
Subsidiary in each of its Domestic Subsidiaries, together with undated stock
transfer powers executed in blank.
(b) Foreign Subsidiaries. At any time any Person becomes a Foreign
--------------------
Subsidiary, the Borrower will notify the Agent thereof within 10 days after a
Responsible Officer has knowledge thereof, and, within 45 days thereafter, cause
(A) delivery of supporting resolutions, incumbency certificates, corporation
formation and organizational documentation and opinions of counsel as the Agent
may reasonably request, and (B) delivery of stock certificates (where required
for perfection under local law) and a related pledge agreement or pledge joinder
agreement evidencing the pledge of 66% of the Voting Stock of such Foreign
Subsidiary and of 66% of the Voting Stock of each of its Domestic Subsidiaries,
together in each case with undated stock transfer powers executed in blank.
(c) Additional Collateral. If, subsequent to the Closing Date, a Credit
---------------------
Party shall (a) acquire any real property, any intellectual property or any
securities or (b) acquire any other personal property required to be delivered
to the Agent as Collateral hereunder or under any of the Security Agreement, the
Borrower shall immediately notify the Agent of same. Each Credit Party shall
take such action (including, but not limited to, the execution of UCC financing
statements or Mortgages), as requested by the Agent and at its own expense, to
ensure that the Lenders have a perfected Lien in such personal property of the
Credit Parties as set forth in the Security Agreement (whether now owned or
hereafter acquired) and any owned or leased real property (to the extent deemed
material by the Agent), subject only to Permitted Liens. Each Credit Party
shall adhere to the covenants regarding the location of personal property as set
forth in the Security Agreement.
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7.12 Ownership of Subsidiaries.
-------------------------
Except to the extent otherwise permitted in Section 8.6, the Borrower
shall, directly or indirectly, own at all times at least 80% of the Voting Stock
of each of its Subsidiaries.
7.13 Use of Proceeds.
---------------
Extensions of Credit will be used solely for the purposes provided in
Section 6.15.
7.14 Interest Rate Protection Agreements.
-----------------------------------
At such time as the aggregate amount of all outstanding Loans plus LOC
Obligations equals at least $40,000,000, the Borrower shall: (a) within 90 days
of such date, enter into interest rate protection agreements providing coverage
for at least $20,000,000 and (b) at all times thereafter, enter into additional
interest rate protection agreements providing coverage for at least $5,000,000
for each $10,000,000 of outstanding Loans plus LOC Obligations in excess of
$40,000,000. All such interest rate protection agreements shall protect against
fluctuations in interest rates and shall be satisfactory in form and substance
to the Agent in its reasonable discretion
7.15 Year 2000 Compatibility.
-----------------------
Take all action necessary to assure that its computer based systems are
able to operate and effectively process data including dates on and after
January 1, 2000, and, at the reasonable request of the Agent or the Required
Lenders, provide evidence to the Lenders of such year 2000 compatibility.
7.16 Field Examination.
-----------------
Within six months following the Closing Date, the Borrower shall permit the
Agent (or a third party satisfactory to the Agent) to conduct a written business
audit of the accounts receivable, inventory, payables, controls and systems of
the Consolidated Group. If the results of such audit are not satisfactory to
the Agent, in its reasonable discretion, the Borrower covenants and agrees to
cooperate in good faith with the Agent to develop a plan of action that will
correct the deficiencies identified by the Agent within 180 days of the
completion of such audit.
SECTION 8
NEGATIVE COVENANTS
Each of the Credit Parties covenants and agrees that on the Closing Date,
and so long as this Credit Agreement is in effect and until the Commitments have
been terminated, no Obligations remain outstanding and all amounts owing
hereunder or in connection herewith, have been paid in full, no member of the
Consolidated Group shall:
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8.1 Indebtedness.
------------
Contract, create, incur, assume or permit to exist any Indebtedness,
except:
(a) Indebtedness arising or existing under this Credit Agreement and the
other Credit Documents;
(b) Indebtedness set forth in Schedule 8.1, and renewals, refinancings and
------------
extensions thereof on terms and conditions no less favorable than for such
existing Indebtedness;
(c) Capital Lease Obligations and Indebtedness incurred, in each case, to
provide all or a portion of the purchase price or costs of construction of an
asset or, in the case of a sale/leaseback transaction as described in Section
8.10, to finance the value of such asset owned by a member of the Consolidated
Group, provided that (i) such Indebtedness when incurred shall not exceed the
--------
purchase price or cost of construction of such asset or, in the case of a
sale/leaseback transaction, the fair market value of such asset, (ii) no such
Indebtedness shall be refinanced for a principal amount in excess of the
principal balance outstanding thereon at the time of such refinancing, and (iii)
the total amount of all such Indebtedness shall not exceed $2,000,000 at any
time outstanding;
(d) Indebtedness and obligations owing under Hedging Agreements entered
into in the ordinary course of business to manage existing or anticipated risks
and not for speculative purposes;
(e) unsecured intercompany Indebtedness owing by a member of the
Consolidated Group to another member of the Consolidated Group (subject,
however, to the limitations of Section 8.4 in the case of the member of the
Consolidated Group extending the intercompany loan, advance or credit);
(f) other unsecured Indebtedness of the Borrower of up to $1,000,000 in the
aggregate at any time outstanding;
(g) Support Obligations of Indebtedness permitted under this Section 8.1;
and
(h) Subordinated Debt of the Borrower issued in connection with an
acquisition permitted by Section 8.3, provided that after giving effect thereto
no Default or Event of Default would exist on a Pro Forma Basis.
(i) Indebtedness of the Borrower secured by equipment ("Equipment
Indebtedness") or unsecured working capital Indebtedness ("Working Capital
Indebtedness"), in each case assumed in connection with an acquisition permitted
by Section 8.3, provided that (A) any Working Capital Indebtedness so assumed
must contain a prepayment penalty that is applicable at the time of the closing
of such acquisition and such Working Capital Indebtedness so assumed must be
paid in full and terminated within six months of the closing of such
acquisition, (B) after giving effect to the assumption of any such Equipment
Indebtedness or Working Capital
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Indebtedness, no Default or Event of Default would exist on a Pro Forma Basis
and (C) the aggregate principal amount of all such Equipment Indebtedness and
Working Capital Indebtedness at any time outstanding shall not exceed
$2,000,000, and
(j) Indebtedness of the Borrower in the form of earn-out obligations
incurred in connection with an acquisition permitted by Section 8.3, provided
that after giving effect to the incurrence of such obligation no Default or
Event of Default would exist on a Pro Forma Basis.
8.2 Liens.
-----
Contract, create, incur, assume or permit to exist any Lien with respect to
any of their respective property or assets of any kind (whether real or
personal, tangible or intangible), whether now owned or hereafter acquired,
except for Permitted Liens.
8.3 Consolidation, Merger, Sale or Purchase of Assets, etc.
------------------------------------------------------
(a) Enter into a transaction of merger or consolidation, except a
------
member of the Consolidated Group may be a party to a transaction of merger or
consolidation with any Person, provided that (A) the Borrower may be a party to
--------
a transaction of merger or consolidation only with another member of the
Consolidated Group and in any such case the Borrower shall be the surviving
corporation thereto, (B) in any other case, the surviving corporation shall be a
Domestic Subsidiary and such Domestic Subsidiary shall become a Guarantor
hereunder as an Additional Credit Party pursuant to Section 7.11 concurrently
therewith, (C) no Default or Event of Default shall exist either immediately
prior to or immediately after giving effect thereto and (D) in the case of a
transaction of merger or consolidation with any Person which is not a member of
the Consolidated Group, the provisions of subsection (c) of this Section 8.3
shall be complied with.
(b) Sell, lease, transfer or otherwise dispose of assets, property
and/or operations (including any sale-leaseback transaction, but excluding the
sale of inventory in the ordinary course of business), other than to another
Credit Party, which
(i) in any instance (including any series of related
transactions) shall constitute more than five percent (5%) of consolidated
assets at the end of the immediately preceding fiscal year or five percent
(5%) of Consolidated Net Income for the immediately preceding fiscal year,
or
(ii) in the aggregate in any fiscal year shall constitute more
than ten percent (10%) of consolidated assets at the end of the immediately
preceding fiscal year or ten percent (10%) Consolidated Net Income for the
immediately preceding fiscal year, and
(iii) no Default or Event of Default would exist after giving
effect thereto on a Pro Forma Basis.
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<PAGE>
(c) Acquire all or any portion of the capital stock or other ownership
interest in any Person which is not a Subsidiary or all or any substantial
portion of the assets, property and/or operations of a Person which is not a
Subsidiary, unless
------
(i) in the case of an acquisition of capital stock or other
ownership interest after giving effect thereto, such Person will not be a
Subsidiary, then such acquisition will not cause a violation of Section
8.4; or
(ii) (A) in the case of an acquisition of capital stock or other
ownership interest where, after giving effect thereto, such Person will be
a Subsidiary, or (B) in the case of an acquisition of assets, property
and/or operations then
(I) (x) the total cash consideration paid in connection with
any such acquisition (or series of related transactions) shall not
exceed $15,000,000 in any instance (or in the case of an acquisition
of the type described in clause (c)(ii)(A) above constituting less
than 100% of the outstanding capital stock or other ownership
interests of any Person, the total cash consideration paid in
connection therewith shall not exceed $10,000,000 in any instance);
and (y) the aggregate cost (including, without limitation, cash
consideration paid and assumption of Indebtedness) of all such
acquisitions (or series of related transactions) shall not exceed
$30,000,000 during any fiscal year; provided, however, acquisitions
-------- -------
specifically reviewed and approved by the Required Lenders (and not
automatically approved pursuant to clause (x) above) shall not be
counted toward the aggregate annual limit in this clause (y);
(II) the Board of Directors of the Person which is the
subject of such acquisition shall have approved such acquisition; and
(III) no Default or Event of Default would exist after
giving effect thereto on a Pro Forma Basis.
(d) In the case of the Borrower and any Subsidiary which is not
wholly-owned, liquidate, wind-up or dissolve, whether voluntarily or
involuntarily (or suffer to permit any such liquidation or dissolution).
(e) Alter the character of their business in any material respect from
that conducted as of the Closing Date and similar or related businesses.
8.4 Advances, Investments and Loans.
-------------------------------
Lend money or extend credit or make advances to any Person, or purchase or
acquire any stock, obligations or securities of, or any other interest in, or
make any capital contribution to, or otherwise make an Investment in, any Person
except for Permitted Investments.
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<PAGE>
8.5 Transactions with Affiliates.
----------------------------
Enter into or permit to exist any transaction or series of transactions,
whether or not in the ordinary course of business, with any officer, director,
shareholder or Affiliate other than (i) transactions permitted by Section 8.1,
Section 8.3(b), Section 8.4 or Section 8.9, (ii) customary fees and expenses
paid to directors and (iii) where such transactions are on terms and conditions
substantially as favorable as would be obtainable in a comparable arm's-length
transaction with a Person other than an officer, director, shareholder or
Affiliate.
8.6 Ownership of Equity Interests.
-----------------------------
Issue, sell, transfer, pledge or otherwise dispose of any partnership
interests, shares of capital stock or other equity or ownership interests
("Equity Interests") in any member of the Consolidated Group, except (i) the
- ------------------
issuance of additional shares of common stock by the Borrower in a registered
public offering or in a private placement of such shares or in connection with
an acquisition consummated prior to the Closing Date or permitted by Section
8.3, (ii) the issuance, sale or transfer of Equity Interests to a Credit Party
by a Subsidiary of such Credit Party, (iii) as needed to qualify directors under
applicable law and (iv) in connection with the exercise by any former, present
or future employee, officer or director under any stock incentive plan, stock
option plan or other equity-based compensation plan or arrangement (collectively
"Stock Option Plans"), provided such Stock Option Plans in the aggregate do not
------------------
exceed 15% of the total equity in such member.
8.7 Fiscal Year.
-----------
Change its fiscal year from a December 31 fiscal year end.
8.8 Prepayments of Indebtedness, etc.
---------------------------------
(a) After the issuance thereof, amend or modify (or permit the amendment or
modification of), the terms of any other Indebtedness in a manner adverse to the
interests of the Lenders (including specifically shortening any maturity or
average life to maturity or requiring any payment sooner than previously
scheduled or increasing the interest rate or fees applicable thereto);
(b) Make any prepayment, redemption, defeasance or acquisition for value of
(including without limitation, by way of depositing money or securities with the
trustee with respect thereto before due for the purpose of paying when due), or
refund, refinance or exchange of any Funded Debt (other than intercompany
Indebtedness permitted hereunder) other than regularly scheduled payments of
principal and interest on such Funded Debt.
8.9 Restricted Payments.
-------------------
Make or permit any Restricted Payments except for redemptions of shares of
Preferred Stock (i) on the Closing Date in an amount not to exceed $2,500,000,
(ii) with proceeds of
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additional shares of common stock issued by the Borrower in a public offering,
provided at least 80% of the Net Proceeds of such additional capital stock
issued by the Borrower are used to prepay the Term Loan pursuant to the terms of
Section 3.3(b) or (iii) at such time as the Borrower achieves net income (as
defined below in this Section 8.9) of at least $10,000,000 over any four
consecutive calendar quarters as reported in the financial statements delivered
pursuant to Section 7.1; provided, however, such redemptions described in
-------- -------
clauses (ii) and (iii) shall be permitted only if (A) no Default or Event of
Default exists hereunder and (B) the Consolidated Senior Leverage Ratio shall
not exceed 2.25 to 1.00, both (I) after giving effect to such redemption on a
Pro Forma Basis and (II) after giving effect thereto in the pro forma financial
statements for the coming fiscal year based on the annual projections provided
pursuant to Section 7.1(b)(iii). For purposes of clause (iii) of this Section
8.9, the "Consolidated Senior Leverage Ratio" shall mean the ratio of (a)
Consolidated Funded Debt minus Subordinated Debt to (b) Consolidated EBITDA for
-----
the period of four consecutive fiscal quarters ending as of such day minus
-----
increases in working capital (as defined by GAAP) during such period.
8.10 Sale Leasebacks.
---------------
Except as permitted pursuant to Section 8.1(c) hereof, directly or
indirectly, become or remain liable as lessee or as guarantor or other surety
with respect to any lease, whether an Operating Lease or a Capital Lease, of any
Property (whether real or personal or mixed), whether now owned or hereafter
acquired, (i) which such Person has sold or transferred or is to sell or
transfer to any other Person other than a Credit Party or (ii) which such Person
intends to use for substantially the same purpose as any other Property which
has been sold or is to be sold or transferred by such Person to any other Person
in connection with such lease.
8.11 Limitations on Restricted Actions.
---------------------------------
Directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any such
Person to (a) pay dividends or make any other distributions to any Credit Party
on its capital stock or with respect to any other interest or participation in,
or measured by, its profits, (b) pay any Indebtedness or other obligation owed
to any Credit Party, (c) make loans or advances to any Credit Party, (d) sell,
lease or transfer any of its properties or assets to any Credit Party, (e) grant
a lien on its properties or assets whether now owned or hereafter acquired or
(f) act as a Guarantor and pledge its assets pursuant to the Credit Documents or
any renewals, refinancings, exchanges, refundings or extension thereof, except
(in respect of any of the matters referred to in clauses (a)-(d) above) for such
encumbrances or restrictions existing under or by reason of (i) this Credit
Agreement and the other Credit Documents or (ii) applicable law.
8.12 No Further Negative Pledges.
---------------------------
Except with respect to prohibitions against other encumbrances on specific
Property encumbered to secure payment of particular Indebtedness (which
Indebtedness relates solely to such specific Property, and improvements and
accretions thereto, and is otherwise permitted hereby), no member of the
Consolidated Group will enter into, assume or become subject to any
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agreement prohibiting or otherwise restricting the creation or assumption of any
Lien upon its properties or assets, whether now owned or hereafter acquired, or
requiring the grant of any security for such obligation if security is given for
some other obligation.
8.13 No Foreign Subsidiaries.
-----------------------
Create, acquire or permit to exist any Foreign Subsidiaries except for the
formation of a new Foreign Subsidiary in compliance with the terms of Section
7.11(b) and with the limitations set forth in subclause (xiii) of the definition
of Permitted Investments.
SECTION 9
EVENTS OF DEFAULT
-----------------
9.1 Events of Default.
-----------------
An Event of Default shall exist upon the occurrence of any of the following
specified events (each an "Event of Default"):
----------------
(a) Payment. Any Credit Party shall
-------
(i) default in the payment when due of any principal of any of the
Loans or of any reimbursement obligations arising from drawings under
Letters of Credit, or
(ii) default, and such default shall continue for five (5) or more
Business Days, in the payment when due of any interest on the Loans or any
interest on any reimbursement obligations arising from drawings under
Letters of Credit, or of any Fees or other amounts owing hereunder, under
any of the other Credit Documents or in connection herewith or therewith; or
(b) Representations. Any representation, warranty or statement made or
---------------
deemed to be made herein, in any of the other Credit Documents, or in any
statement or certificate delivered or required to be delivered pursuant hereto
or thereto shall prove untrue in any material respect on the date as of which it
was made or deemed to have been made; or
(c) Covenants.
---------
(i) Default in the due performance or observance of any term,
covenant or agreement contained in Section 7.3(a), 7.9, 7.11, 7.13 or 8.1
through 8.13, inclusive, or
(ii) Default in the due performance or observance by it of any
term, covenant or agreement (other than those referred to in subsections
(a), (b) or (c)(i) of this Section 9.1) contained in this Credit Agreement
and such default shall continue unremedied for a period
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of at least 30 days after the earlier of a responsible officer of a Credit
Party becoming aware of such default or notice thereof by the Agent; or
(d) Other Credit Documents. (i) Any Credit Party shall default in the due
----------------------
performance or observance of any material term, covenant or agreement in any of
the other Credit Documents (subject to applicable grace or cure periods, if
any), or (ii) except as to the Credit Party which is dissolved, released or
merged or consolidated out of existence as the result of or in connection with a
dissolution, merger or disposition permitted by Section 8.3(a), Section 8.3(b)
or Section 8.3(c), any Credit Document shall fail to be in full force and effect
or to give the Agent and/or the Lenders any material part of the Liens, rights,
powers and privileges purported to be created thereby; or
(e) Guaranties. Except as to the Credit Party which is dissolved, released
----------
or merged or consolidated out of existence as the result of or in connection
with a dissolution, merger or disposition permitted by Section 8.3(a), Section
8.3(b) or Section 8.3(c), the guaranty given by any Guarantor hereunder or any
material provision thereof shall cease to be in full force and effect, or any
Guarantor hereunder or any Person acting by or on behalf of such Guarantor shall
deny or disaffirm such Guarantor's obligations under such guaranty, or any
Guarantor shall default in the due performance or observance of any term,
covenant or agreement on its part to be performed or observed pursuant to any
guaranty; or
(f) Bankruptcy, etc. Any Bankruptcy Event shall occur with respect to any
---------------
member of the Consolidated Group; or
(g) Defaults under Other Agreements.
-------------------------------
(i) Any member of the Consolidated Group shall default in the
performance or observance (beyond the applicable grace period with respect
thereto, if any) of any material obligation or condition of any contract or
lease material to the Consolidated Group, taken as a whole (including,
without limitation, the Sprint Agreement); or
(ii) With respect to any Indebtedness (other than Indebtedness
outstanding under this Credit Agreement) in excess of $2,000,000 in the
aggregate for the Consolidated Group taken as a whole, (A) (1) any member of
the Consolidated Group shall default in any payment (beyond the applicable
grace period with respect thereto, if any) with respect to any such
Indebtedness, or (2) the occurrence and continuance of a default in the
observance or performance relating to such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any
other event or condition shall occur or condition exist, the effect of which
default or other event or condition is to cause, or permit, the holder or
holders of such Indebtedness (or trustee or agent on behalf of such holders)
to cause (determined without regard to whether any notice or lapse of time
is required), any such Indebtedness to become due prior to its stated
maturity; or (B) any such Indebtedness shall be declared due and payable, or
required to be prepaid other than by a regularly scheduled required
prepayment, prior to the stated maturity thereof; or
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(h) Judgments. Any member of the Consolidated Group shall fail within 30
---------
days of the date due and payable to pay, bond or otherwise discharge any
judgment, settlement or order for the payment of money which judgment,
settlement or order, when aggregated with all other such judgments, settlements
or orders due and unpaid at such time, exceeds $2,000,000, and which is not
stayed on appeal (or for which no motion for stay is pending) or is not
otherwise being executed; or
(i) ERISA. Any of the following events or conditions, if such event or
-----
condition could reasonably be expected to have a Material Adverse Effect: (1)
any "accumulated funding deficiency," as such term is defined in Section 302 of
ERISA and Section 412 of the Internal Revenue Code, whether or not waived, shall
exist with respect to any Plan, or any lien shall arise on the assets of a
member of the Consolidated Group or any ERISA Affiliate in favor of the PBGC or
a Plan; (2) an ERISA Event shall occur with respect to a Single Employer Plan,
which is, in the reasonable opinion of the Agent, likely to result in the
termination of such Plan for purposes of Title IV of ERISA; (3) an ERISA Event
shall occur with respect to a Multiemployer Plan or Multiple Employer Plan,
which is, in the reasonable opinion of the Agent, likely to result in (i) the
termination of such Plan for purposes of Title IV of ERISA, or (ii) a member of
the Consolidated Group or any ERISA Affiliate incurring any liability in
connection with a withdrawal from, reorganization of (within the meaning of
Section 4241 of ERISA), or insolvency of (within the meaning of Section 4245 of
ERISA) such Plan; or (4) any prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Internal Revenue Code) or breach of
fiduciary responsibility shall occur which may subject a member of the
Consolidated Group or any ERISA Affiliate to any liability under Sections 406,
409, 502(i), or 502(l) of ERISA or Section 4975 of the Internal Revenue Code, or
under any agreement or other instrument pursuant to which a member of the
Consolidated Group or any ERISA Affiliate has agreed or is required to indemnify
any person against any such liability; or
(j) Ownership. There shall occur a Change of Control.
---------
9.2 Acceleration; Remedies.
----------------------
Upon the occurrence of an Event of Default, and at any time thereafter, the
Agent shall, upon the request and direction of the Required Lenders, by written
notice to the Credit Parties take any of the following actions:
(i) Termination of Commitments. Declare the Commitments
--------------------------
terminated whereupon the Commitments shall be immediately terminated.
(ii) Acceleration. Declare the unpaid principal of and any
------------
accrued interest in respect of all Loans, any reimbursement obligations
arising from drawings under Letters of Credit and any and all other
indebtedness or obligations of any and every kind owing by the Credit
Parties to the Agent and/or any of the Lenders hereunder to be due whereupon
the same shall be immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by each
of the Credit Parties. Amounts received hereunder after termination of the
Commitments and acceleration of the
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maturity of the Loans and obligations hereunder, shall be shared ratably
between the Revolving Lenders based on the outstanding principal amount of
Revolving Obligations, on the one hand, and the Term Lenders based on the
outstanding principal amount of the Term Loan, on the other hand.
(iii) Cash Collateral. Direct the Borrower to pay (and the
---------------
Borrower agrees that upon receipt of such notice, or upon the occurrence of
an Event of Default under Section 9.1(f), it will immediately pay) to the
Agent additional cash, to be held by the Agent, for the benefit of the
Revolving Lenders, in a cash collateral account as additional security for
the LOC Obligations in respect of subsequent drawings under all then
outstanding Letters of Credit in an amount equal to the maximum aggregate
amount which may be drawn under all Letters of Credits then outstanding.
(iv) Enforcement of Rights. Enforce any and all rights and
---------------------
interests created and existing under the Credit Documents and all rights of
set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur, then the Commitments shall automatically terminate and all
Loans, all reimbursement obligations arising from drawings under Letters of
Credit, all accrued interest in respect thereof, all accrued and unpaid Fees and
other indebtedness or obligations owing to the Agent and/or any of the Lenders
hereunder automatically shall immediately become due and payable without
presentment, demand, protest or the giving of any notice or other action by the
Agent or the Lenders, all of which are hereby waived by the Credit Parties.
SECTION 10
AGENCY PROVISIONS
-----------------
10.1 Appointment.
-----------
Each Lender hereby designates and appoints NationsBank, as administrative
agent (in such capacity, the "Agent") of such Lender to act as specified herein
-----
and the other Credit Documents, and each such Lender hereby authorizes the Agent
as the Agent for such Lender, to take such action on its behalf under the
provisions of this Credit Agreement and the other Credit Documents and to
exercise such powers and perform such duties as are expressly delegated by the
terms hereof and of the other Credit Documents, together with such other powers
as are reasonably incidental thereto. Each Lender further directs and authorizes
the Agent to execute releases (or similar agreements) to give effect to the
provisions of this Credit Agreement and the other Credit Documents, including
specifically, without limitation, the provisions of Section 8.3 hereof.
Notwithstanding any provision to the contrary elsewhere herein and in the other
Credit Documents, the Agent shall not have any duties or responsibilities,
except those expressly set forth herein and therein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Credit Agreement or any of the other Credit Documents, or shall otherwise exist
against the Agent. The provisions of this Section 10.1 are solely for the
benefit of the Agent and the Lenders, and none of the Credit Parties shall have
any
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rights as a third party beneficiary of the provisions hereof. In performing
its functions and duties under this Credit Agreement and the other Credit
Documents, the Agent shall act solely as Agent of the Lenders and does not
assume and shall not be deemed to have assumed any obligation or relationship of
agency or trust with or for any Credit Party or any of their respective
Affiliates.
10.2 Delegation of Duties.
--------------------
The Agent may execute any of its duties hereunder or under the other Credit
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 Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
10.3 Exculpatory Provisions.
----------------------
The Agent and its officers, directors, employees, agents, attorneys-in-fact
or affiliates shall not be (i) liable for any action lawfully taken or omitted
to be taken by it or such Person under or in connection herewith or in
connection with any of the other Credit Documents (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 any of the Credit Parties contained herein or in any of the
other Credit Documents or in any certificate, report, document, financial
statement or other written or oral statement referred to or provided for in, or
received by the Agent under or in connection herewith or in connection with the
other Credit Documents, or enforceability or sufficiency therefor of any of the
other Credit Documents, or for any failure of any Credit Party to perform its
obligations hereunder or thereunder. The Agent shall not be responsible to any
Lender for the effectiveness, genuineness, validity, enforceability,
collectability or sufficiency of this Credit Agreement, or any of the other
Credit Documents or for any representations, warranties, recitals or statements
made herein or therein or made by the Borrower or any Credit Party in any
written or oral statement or in any financial or other statements, instruments,
reports, certificates or any other documents in connection herewith or therewith
furnished or made by the Agent to the Lenders or by or on behalf of the Credit
Parties to the Agent or any Lender or be required to ascertain or inquire as to
the performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained herein or therein or as to the use of the
proceeds of the Loans or the use of the Letters of Credit or of the existence or
possible existence of any Default or Event of Default or to inspect the
properties, books or records of the Credit Parties or any of their respective
Affiliates.
10.4 Reliance on Communications.
--------------------------
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, 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 any of the Credit Parties, independent accountants and
other experts selected by the Agent with reasonable care). The Agent may deem
and treat the Lenders as the owners of their respective interests
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hereunder for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Agent in accordance with Section
11.3(b) hereof. The Agent shall be fully justified in failing or refusing to
take any action under this Credit Agreement or under any of the other Credit
Documents unless it shall first receive such advice or concurrence of the
Required Lenders as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder or under any of the other Credit Documents in accordance with
a request of the Required Lenders (or to the extent specifically provided in
Section 11.6, all the Lenders) and such request and any action taken or failure
to act pursuant thereto shall be binding upon all the Lenders (including their
successors and assigns).
10.5 Notice of Default.
-----------------
The Agent shall not be deemed to have knowledge or notice of the occurrence
of any Default or Event of Default hereunder unless the Agent has received
notice from a Lender or a Credit Party referring to the Credit Document,
describing such Default or Event of Default and stating that such notice is a
"notice of default." In the event that the Agent receives such a notice, the
Agent shall give prompt notice thereof to the Lenders. The Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders.
10.6 Non-Reliance on Agent and Other Lenders.
---------------------------------------
Each Lender expressly acknowledges that each of the Agent and its officers,
directors, employees, Agents, attorneys-in-fact or affiliates has not made any
representations or warranties to it and that no act by the Agent or any
affiliate thereof hereinafter taken, including any review of the affairs of any
Credit Party or any of their respective Affiliates, shall be deemed to
constitute any representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon the 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, assets, operations, property, financial and other conditions,
prospects and creditworthiness of the Borrower, the other Credit Parties or
their respective Affiliates and made its own decision to make its Loans
hereunder and enter into this Credit Agreement. Each Lender also represents
that it will, independently and without reliance upon the Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit analysis, appraisals and decisions
in taking or not taking action under this Credit Agreement, and to make such
investigation as it deems necessary to inform itself as to the business, assets,
operations, property, financial and other conditions, prospects and
creditworthiness of the Borrower, the other Credit Parties and their respective
Affiliates. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by the Agent hereunder, the Agent shall not have
any duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, assets, property, financial or
other conditions, prospects or creditworthiness of the Borrower, the other
Credit Parties or any of their respective Affiliates which may come into the
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possession of the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
10.7 Indemnification.
---------------
The Lenders agree to indemnify the 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 Commitments (or if the
Commitments have expired or been terminated, in accordance with the respective
principal amounts of outstanding Loans and Participation Interests of the
Lenders), 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 final payment of all of the obligations of the Borrower
hereunder and under the other Credit Documents) be imposed on, incurred by or
asserted against the Agent in its capacity as such in any way relating to or
arising out of this Credit Agreement or the other Credit 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 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 gross negligence or willful misconduct of the Agent. If any
indemnity furnished to the Agent for any purpose shall, in the opinion of the
Agent, be insufficient or become impaired, the Agent may call for additional
indemnity and cease, or not commence, to do the acts indemnified against until
such additional indemnity is furnished. The agreements in this Section shall
survive the repayment of the Loans, LOC Obligations and other obligations under
the Credit Documents and the termination of the Commitments hereunder.
10.8 Agent in its Individual Capacity.
--------------------------------
The Agent and its affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrower, its Subsidiaries or
their respective Affiliates as though the Agent were not the Agent hereunder.
With respect to the Loans made by and all obligations of the Borrower hereunder
and under the other Credit Documents, the Agent shall have the same rights and
powers under this Credit Agreement as any Lender and may exercise the same as
though it were not the Agent, and the terms "Lender" and "Lenders" shall include
the Agent in its individual capacity.
10.9 Successor Agent.
---------------
The Agent may, at any time, resign upon 20 days' written notice to the
Lenders, and may be removed, upon show of cause, by the Required Lenders upon 30
days' written notice to the Agent. Upon any such resignation or removal, the
Required Lenders shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders, and shall
have accepted such appointment, within 30 days after the notice of resignation
or notice of removal, as appropriate, then the retiring Agent shall select a
successor Agent provided such successor is a Lender hereunder or a commercial
bank organized under the laws of the United
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States of America or of any State thereof and has a combined capital and surplus
of at least $400,000,000. Upon the acceptance of any appointment as Agent
hereunder by a successor, such successor Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations as Agent, as appropriate, under this Credit Agreement and the other
Credit Documents and the provisions of this Section 10.9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Credit Agreement.
SECTION 11
MISCELLANEOUS
-------------
11.1 Notices.
-------
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (i) when
delivered, (ii) when transmitted via confirmed telecopy (or other confirmed
facsimile device) to the number set out below, (iii) the day following the day
on which the same has been delivered prepaid to a reputable national overnight
air courier service, or (iv) the third Business Day following the day on which
the same is sent by certified or registered mail, postage prepaid, in each case
to the respective parties at the address, in the case of the Borrower,
Guarantors and the Agent, set forth below, and, in the case of the Lenders, set
forth on Schedule 11.1, or at such other address as such party may specify by
-------------
written notice to the other parties hereto:
if to the Borrower or the Guarantors:
Access Worldwide Communications, Inc.
2200 Clarendon Boulevard
12th Floor
Arlington, Virginia 22201
Attn: Chief Financial Officer
Telephone: (703) 516-6425
Telecopy: (703) 812-9561
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if to the Agent:
NationsBank, N.A.
101 N. Tryon Street
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attn: Agency Services, William Cessna
Telephone: (704) 386-7637
Telecopy: (704) 409-0229
with a copy to:
NationsBank, N.A.
6610 Rockledge Drive
Bethesda, Maryland 20817-1876
Attn: Maria Reed
Telephone: (301) 493-7072
Telecopy: (301) 571-9098
11.2 Right of Set-Off.
----------------
In addition to any rights now or hereafter granted under applicable law or
otherwise, and not by way of limitation of any such rights, upon the occurrence
of an Event of Default, each Lender is authorized at any time and from time to
time, without presentment, demand, protest or other notice of any kind (all of
which rights being hereby expressly waived), to set-off and to appropriate and
apply any and all deposits (general or special) and any other indebtedness at
any time held or owing by such Lender (including, without limitation branches,
agencies or Affiliates of such Lender wherever located) to or for the credit or
the account of any Credit Party against obligations and liabilities of such
Credit Party to such Lender hereunder, under the Notes, the other Credit
Documents or otherwise, irrespective of whether such Lender shall have made any
demand hereunder and although such obligations, liabilities or claims, or any of
them, may be contingent or unmatured, and any such set-off shall be deemed to
have been made immediately upon the occurrence of an Event of Default even
though such charge is made or entered on the books of such Lender subsequent
thereto. Any Person purchasing a participation in the Loans and Commitments
hereunder pursuant to Section 3.13 or Section 11.3(d) may exercise all rights of
set-off with respect to its participation interest as fully as if such Person
were a Lender hereunder.
11.3 Benefit of Agreement.
--------------------
(a) Generally. This Credit Agreement shall be binding upon and inure to
---------
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto; provided that none of the Credit Parties may assign or
--------
transfer any of its interests without prior written consent of the Lenders;
provided further that the rights of each Lender to transfer, assign or grant
- -------- -------
participations in its rights and/or obligations hereunder shall be limited as
set forth in this Section
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11.3, provided however that nothing herein shall prevent or prohibit any Lender
--------
from (i) pledging its Loans hereunder to a Federal Reserve Bank in support of
borrowings made by such Lender from such Federal Reserve Bank, or (ii) granting
assignments or selling participations in such Lender's Loans and/or Commitments
hereunder to its parent company and/or to any Affiliate or Subsidiary of such
Lender.
(b) Assignments. Each Lender may assign all or a portion of its rights and
-----------
obligations hereunder (including, without limitation, all or a portion of its
Commitments or its Loans), pursuant to an assignment agreement substantially in
the form of Schedule 11.3(b), to (i) a Lender, (ii) an affiliate of a Lender or
----------------
(iii) any other Person (other than the Borrower or an Affiliate of the Borrower)
reasonably acceptable to the Agent and, so long as no Default or Event of
Default has occurred and is continuing, the Borrower (the consent of the
Borrower shall not be unreasonably withheld or delayed and such consent shall be
deemed given if the Borrower does not notify the assigning Lender and the Agent
of any objection within two Business Days after the Borrower has been provided
notice of the proposed assignment by the assigning Lender or the Agent);
provided that (i) any such assignment (other than any assignment to an existing
- --------
Lender) shall be in a minimum aggregate amount of $5,000,000 (or, if less, the
remaining amount of the Commitment being assigned by such Lender) of the
Commitments and in integral multiples of $1,000,000 above such amount and (ii)
each such assignment shall be of a constant, not varying, percentage of all such
Lender's rights and obligations under this Credit Agreement. Any assignment
hereunder shall be effective upon delivery to the Agent of written notice of the
assignment together with a transfer fee of $3,500 payable to the Agent for its
own account from and after the later of (i) the effective date specified in the
applicable assignment agreement and (ii) the date of recording of such
assignment in the Register pursuant to the terms of subsection (c) below. The
assigning Lender will give prompt notice to the Agent and the Borrower of any
such assignment. Upon the effectiveness of any such assignment (and after
notice to, and (to the extent required pursuant to the terms hereof), with the
consent of, the Borrower as provided herein), the assignee shall become a
"Lender" for all purposes of this Credit Agreement and the other Credit
Documents and, to the extent of such assignment, the assigning Lender shall be
relieved of its obligations hereunder to the extent of the Loans and Commitment
components being assigned. Along such lines the Borrower agrees that upon
notice of any such assignment and surrender of the appropriate Note or Notes, it
will promptly provide to the assigning Lender and to the assignee separate
promissory notes in the amount of their respective interests substantially in
the form of the original Note (but with notation thereon that it is given in
substitution for and replacement of the original Note or any replacement notes
thereof). By executing and delivering an assignment agreement in accordance
with this Section 11.3(b), the assigning Lender thereunder and the assignee
thereunder shall be deemed to confirm to and agree with each other and the other
parties hereto as follows: (i) such assigning Lender warrants that it is the
legal and beneficial owner of the interest being assigned thereby free and clear
of any adverse claim; (ii) except as set forth in clause (i) above, such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Credit Agreement, any of the other Credit
Documents or any other instrument or document furnished pursuant hereto or
thereto, or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Credit Agreement, any of the other Credit Documents
or any other instrument or document furnished pursuant hereto or thereto or the
financial condition of any Credit Party or any of their respective
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Affiliates or the performance or observance by any Credit Party of any of its
obligations under this Credit Agreement, any of the other Credit Documents or
any other instrument or document furnished pursuant hereto or thereto; (iii)
such assignee represents and warrants that it is legally authorized to enter
into such assignment agreement; (iv) such assignee confirms that it has received
a copy of this Credit Agreement, the other Credit Documents and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such assignment agreement; (v) such assignee
will independently and without reliance upon the Agent, such assigning Lender 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 decisions in taking or
not taking action under this Credit Agreement and the other Credit Documents;
(vi) such assignee appoints and authorizes the Agent to take such action on its
behalf and to exercise such powers under this Credit Agreement or any other
Credit Document as are delegated to the Agent by the terms hereof or thereof,
together with such powers as are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance with their terms all the
obligations which by the terms of this Credit Agreement and the other Credit
Documents are required to be performed by it as a Lender.
(c) Maintenance of Register. The Agent shall maintain at one of its
-----------------------
offices in Charlotte, North Carolina a copy of each Lender assignment agreement
delivered to it in accordance with the terms of subsection (b) above and a
register for the recordation of the identity of the principal amount, type and
Interest Period of each Loan outstanding hereunder, the names, addresses and the
Commitments of the Lenders pursuant to the terms hereof from time to time (the
"Register"). The Agent will make reasonable efforts to maintain the accuracy of
- ---------
the Register and to promptly update the Register from time to time, as
necessary. The entries in the Register shall be conclusive in the absence of
manifest error and the Borrower, the Agent and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Credit Agreement. The Register shall be
available for inspection by the Borrower and each Lender, at any reasonable time
and from time to time upon reasonable prior notice.
(d) Participations. Each Lender may sell, transfer, grant or assign
--------------
participations in all or a portion of such Lender's rights, obligations or
rights and obligations hereunder (including all or a portion of its Commitments
or its Loans); provided that (i) such selling Lender shall remain a "Lender" for
--------
all purposes under this Credit Agreement (such selling Lender's obligations
under the Credit Documents remaining unchanged) and the participant shall not
constitute a Lender hereunder, (ii) no such participant shall have, or be
granted, rights to approve any amendment or waiver relating to this Credit
Agreement or the other Credit Documents except to the extent any such amendment
or waiver would (A) reduce the principal of or rate of interest on or Fees in
respect of any Loans in which the participant is participating, (B) postpone the
date fixed for any payment of principal (including extension of the Termination
Date or the date of any mandatory prepayment), interest or Fees in which the
participant is participating, (C) except as the result of or in connection with
a dissolution, merger or disposition of a Subsidiary permitted under Section
8.3, release the Borrower or substantially all of the Guarantors from its or
their obligations under the Credit Documents, or (D) except as the result of or
in connection with a disposition permitted under Section 8.3(b), release all or
substantially all of the collateral, and (iii) sub-participations by the
participant (except to an affiliate, parent company or affiliate of a parent
company of the
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participant) shall be prohibited. In the case of any such participation, the
participant shall not have any rights under this Credit Agreement or the other
Credit Documents (the participant's rights against the selling Lender in respect
of such participation to be those set forth in the participation agreement with
such Lender creating such participation) and all amounts payable by the Borrower
hereunder shall be determined as if such Lender had not sold such participation,
provided, however, that such participant shall be entitled to receive additional
- --------
amounts under Sections 3.6, 3.9, 3.10, 3.11 and 11.2 on the same basis as if it
were a Lender.
11.4 No Waiver; Remedies Cumulative.
------------------------------
No failure or delay on the part of the Agent or any Lender in exercising
any right, power or privilege hereunder or under any other Credit Document and
no course of dealing between the Agent or any Lender and any of the Credit
Parties shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or under any other Credit
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder or thereunder. The rights and
remedies provided herein are cumulative and not exclusive of any rights or
remedies which the Agent or any Lender would otherwise have. No notice to or
demand on any Credit Party in any case shall entitle the Borrower or any other
Credit Party to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Agent or the Lenders
to any other or further action in any circumstances without notice or demand.
11.5 Payment of Expenses, etc.
------------------------
The Borrower agrees to: (i) pay all reasonable out-of-pocket costs and
expenses (A) of the Agent in connection with the negotiation, preparation,
execution and delivery and administration of this Credit Agreement and the other
Credit Documents and the documents and instruments referred to therein
(including, without limitation, the reasonable fees and expenses of Moore & Van
Allen, PLLC, special counsel to the Agent) and any amendment, waiver or consent
relating hereto and thereto including, but not limited to, any such amendments,
waivers or consents resulting from or related to any work-out, renegotiation or
restructure relating to the performance by the Credit Parties under this Credit
Agreement and (B) of the Agent and the Lenders in connection with enforcement of
the Credit Documents and the documents and instruments referred to therein
(including, without limitation, in connection with any such enforcement, the
reasonable fees and disbursements of counsel for the Agent and each of the
Lenders); (ii) pay and hold each of the Lenders harmless from and against any
and all present and future stamp and other similar taxes with respect to the
foregoing matters and save each of the Lenders harmless from and against any and
all liabilities with respect to or resulting from any delay or omission (other
than to the extent attributable to such Lender) to pay such taxes; and (iii)
defend, indemnify and hold harmless each Lender, its officers, directors,
employees, representatives and agents from and against any and all losses,
liabilities, claims, damages or expenses incurred by any of them as a result of,
or arising out of, or in any way related to, or by reason of (A) any
investigation, litigation or other proceeding (whether or not any Lender is a
party thereto) related to the entering into and/or performance of any Credit
Document or the use of proceeds of any Loans (including other extensions of
credit) hereunder or the consummation of any other transactions contemplated in
any Credit Document,
82
<PAGE>
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation, litigation or other
proceeding or (B) the presence or Release of any Materials of Environmental
Concern at, under or from any Subject Property, or the failure by any member of
the Consolidated Group to comply with any Environmental Law (but excluding, in
the case of either of clause (A) or (B) above, any such losses, liabilities,
claims, damages or expenses to the extent incurred by reason of gross negligence
or willful misconduct on the part of the Person seeking to be indemnified).
11.6 Amendments, Waivers and Consents.
--------------------------------
Neither this Credit Agreement nor any other Credit Document nor any of the
terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing entered into by, or approved in writing by, the Required Lenders and the
Borrower, provided, however, that:
-------- -------
(a) without the consent of each Lender affected thereby, neither this
Credit Agreement nor any of the other Credit Documents may be amended to
(i) extend the final maturity of any Loan or the time of
payment of any reimbursement obligation, or any portion thereof,
arising from drawings under Letters of Credit, or extend or waive any
principal amortization payment of any Loan, or any portion thereof
(other than a waiver or modification of a mandatory prepayment or
commitment reduction hereunder which shall be subject to the consent
of the Required Lenders except as expressly provided otherwise),
(ii) reduce the rate or extend the time of payment of interest
(other than as a result of waiving the applicability of any increase
in interest rates after the occurrence of an Event of Default or on
account of a failure to deliver financial statements on a timely
basis) thereon or Fees hereunder,
(iii) reduce or waive the principal amount of any Loan or of any
reimbursement obligation, or any portion thereof, arising from
drawings under Letters of Credit,
(iv) increase the Commitment of a Lender over the amount
thereof in effect (it being understood and agreed that a waiver of any
Default or Event of Default or mandatory reduction in the Commitments
shall not constitute a change in the terms of any Commitment of any
Lender),
(v) except as the result of or in connection with a
dissolution, merger or disposition of a Subsidiary permitted under
Section 8.3, release the Borrower or substantially all of the
Guarantors from its or their obligations under the Credit Documents,
83
<PAGE>
(vi) except as the result of or in connection with a
disposition permitted under Section 8.3(b), release all or
substantially all of the collateral,
(vii) amend, modify or waive any provision of this Section 11.6
or Section 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 9.1(a),
11.2, 11.3, 11.5 or 11.9,
(viii) modify any percentage specified in, or otherwise amend,
the definition of Required Lenders, or
(ix) consent to the assignment or transfer by the Borrower (or
another Credit Party) of any of its rights and obligations under (or
in respect of) the Credit Documents except as permitted thereby;
(b) without the consent of the Agent, no provision of Section 10 may
be amended;
(c) without the consent of the Issuing Lender, no provision of Section
2.2 may be amended;
(d) without the consent of at least three non-affiliated Lenders which
are then in compliance with their obligations hereunder (as determined by
the Agent) and holding in the aggregate at least 51% of the Commitments,
subclause (ii) of Section 8.3(c) may not be amended; and
(e) without the consent of each Lender, clauses (ii) and (iii) of
Section 8.9 may not be amended.
Notwithstanding the fact that the consent of all the Lenders is required in
certain circumstances as set forth above, (x) each Lender is entitled to vote as
such Lender sees fit on any bankruptcy reorganization plan that affects the
Loans, and each Lender acknowledges that the provisions of Section 1126(c) of
the Bankruptcy Code supersedes the unanimous consent provisions set forth herein
and (y) the Required Lenders may consent to allow a Credit Party to use cash
collateral in the context of a bankruptcy or insolvency proceeding.
11.7 Counterparts.
------------
This Credit Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart.
84
<PAGE>
11.8 Headings.
--------
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.9 Survival.
--------
All indemnities set forth herein, including, without limitation, in Section
2.2(i), 3.9, 3.11, 10.7 or 11.5 shall survive the execution and delivery of this
Credit Agreement, the making of the Loans, the issuance of the Letters of
Credit, the repayment of the Loans, LOC Obligations and other obligations under
the Credit Documents and the termination of the Commitments hereunder, and all
representations and warranties made by the Credit Parties herein shall survive
delivery of the Notes and the making of the Loans hereunder.
11.10 Governing Law; Submission to Jurisdiction; Venue.
------------------------------------------------
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA. Any legal action or proceeding with respect to this Credit Agreement
or any other Credit Document may be brought in the courts of the State of North
Carolina in Mecklenburg County, or of the United States for the Western District
of North Carolina, and, by execution and delivery of this Credit Agreement, each
of the Credit Parties hereby irrevocably accepts for itself and in respect of
its property, generally and unconditionally, the nonexclusive jurisdiction of
such courts. Each of the Credit Parties further irrevocably consents to the
service of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to it at the address set out for notices pursuant to Section
11.1, such service to become effective three (3) days after such mailing.
Nothing herein shall affect the right of the Agent to serve process in any other
manner permitted by law or to commence legal proceedings or to otherwise proceed
against any Credit Party in any other jurisdiction.
(b) Each of the Credit Parties hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Credit Agreement or any other Credit Document brought in the courts referred to
in subsection (a) hereof and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum.
(c) TO THE EXTENT PERMITTED BY LAW, EACH OF THE AGENT, THE LENDERS, THE
BORROWER AND THE OTHER CREDIT PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
85
<PAGE>
11.11 Severability.
------------
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.12 Entirety.
--------
This Credit Agreement together with the other Credit Documents represent
the entire agreement of the parties hereto and thereto, and supersede all prior
agreements and understandings, oral or written, if any, including any commitment
letters or correspondence relating to the Credit Documents or the transactions
contemplated herein and therein.
11.13 Binding Effect; Termination.
---------------------------
(a) This Credit Agreement shall become effective at such time on or after
the Closing Date when it shall have been executed by the Borrower, the
Guarantors and the Agent, and the Agent shall have received copies hereof
(telefaxed or otherwise) which, when taken together, bear the signatures of each
Lender, and thereafter this Credit Agreement shall be binding upon and inure to
the benefit of the Borrower, the Guarantors, the Agent and each Lender and their
respective successors and assigns.
(b) The term of this Credit Agreement shall commence on the effective date
pursuant to subsection (a) above and shall continue until no Loans, LOC
Obligations or any other amounts payable hereunder or under any of the other
Credit Documents shall remain outstanding and until all of the Commitments
hereunder shall have expired or been terminated.
11.14 Confidentiality.
---------------
The Agent and the Lenders agree to keep confidential (and to cause their
respective affiliates, officers, directors, employees, agents and
representatives to keep confidential) all information, materials and documents
furnished to the Agent or any such Lender by or on behalf of any Credit Party
(whether before or after the Closing Date) which relates to the Borrower or any
of its Subsidiaries (the "Information"). Notwithstanding the foregoing, the
-----------
Agent and each Lender shall be permitted to disclose Information (i) to its
affiliates, officers, directors, employees, agents, attorneys and
representatives in connection with its participation in any of the transactions
evidenced by this Credit Agreement or any other Credit Documents or the
administration of this Credit Agreement or any other Credit Documents; (ii) to
the extent required by applicable laws and regulations or by any subpoena or
similar legal process, or requested by any Governmental Authority; (iii) to the
extent such Information (A) becomes publicly available other than as a result of
a breach of this Credit Agreement or any agreement entered into pursuant to
clause (iv) below, (B) becomes available to the Agent or such Lender on a non-
confidential basis from a source other than a Credit Party or (C) was available
to the Agent or such Lender on a non-confidential basis
86
<PAGE>
prior to its disclosure to the Agent or such Lender by a Credit Party; (iv) to
any assignee or participant (or prospective assignee or participant) so long as
such assignee or participant (or prospective assignee or participant) first
specifically agrees in a writing furnished to and for the benefit of the Credit
Parties to be bound by the terms of this Section 11.14; or (v) to the extent
that the Borrower shall have consented in writing to such disclosure. Nothing
set forth in this Section 11.14 shall obligate the Agent or any Lender to return
any materials furnished by the Credit Parties.
11.15 Source of Funds.
---------------
Each of the Lenders hereby represents and warrants to the Borrower that at
least one of the following statements is an accurate representation as to the
source of funds to be used by such Lender in connection with the financing
hereunder:
(a) no part of such funds constitutes assets allocated to any
separate account maintained by such Lender in which any employee benefit
plan (or its related trust) has any interest;
(b) to the extent that any part of such funds constitutes assets
allocated to any separate account maintained by such Lender, such Lender
has disclosed to the Borrower the name of each employee benefit plan whose
assets in such account exceed 10% of the total assets of such account as of
the date of such purchase (and, for purposes of this subsection (b), all
employee benefit plans maintained by the same employer or employee
organization are deemed to be a single plan);
(c) to the extent that any part of such funds constitutes assets
of an insurance company's general account, such insurance company has
complied with all of the requirements of the regulations issued under
Section 401(c)(1)(A) of ERISA; or
(d) such funds constitute assets of one or more specific benefit
plans which such Lender has identified in writing to the Borrower.
As used in this Section 11.15, the terms "employee benefit plan" and "separate
account" shall have the respective meanings assigned to such terms in Section 3
of ERISA.
11.16 Conflict.
--------
To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any Credit Document, on
the other hand, this Credit Agreement shall control.
87
<PAGE>
[Signature Pages to Follow]
88
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Credit Agreement to be duly executed and delivered as of the date first
above written.
BORROWER: ACCESS WORLDWIDE COMMUNICATIONS, INC.
- --------
By:--------------------------
Name:
Title:
GUARANTORS: ASH CREEK, INC.
- ----------
By:--------------------------
Name:
Title:
TLM HOLDINGS, CORP.
By:--------------------------
Name:
Title:
STURGES POND, INC.
By:--------------------------
Name:
Title:
PHOENIX MARKETING GROUP (HOLDINGS), INC.
By:--------------------------
Name:
Title:
[Signatures continue.]
S-1
<PAGE>
TELEMANAGEMENT SERVICES, INC.
By:-------------------------
Name:
Title:
HISPANIC MARKET CONNECTIONS, INC.
By:-------------------------
Name:
Title:
AM MEDICA COMMUNICATIONS, LTD.
By:--------------------------
Name:
Title:
AWWC TEXAS I, L.P.
By:--------------------------
Name:
Title:
[Signatures continue.]
S-2
<PAGE>
LENDERS: NATIONSBANK, N.A.,
- ------- individually in its capacity as a
Lender and in its capacity as Agent
By:__________________________
Name:
Title:
[Signatures continue.]
S-3
<PAGE>
FLEET BANK, N.A.
By:--------------------------
Name:
Title:
[Signatures continue.]
S-4
<PAGE>
SUMMIT BANK
By:---------------------------
Name:
Title:
[Signatures continue.]
S-5
<PAGE>
EUROPEAN AMERICAN BANK
By:------------------------------
Name:
Title:
[Signatures end.]
S-6
<PAGE>
Schedule 2.1(a)
---------------
Schedule of Lenders and Commitments
<TABLE>
<CAPTION>
Revolving Revolving Term Term Loan LOC
Committed Commitment Loan Commitment Committed
Lender Amount Percentage Commitment Percentage Amount
------ --------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
NationsBank, N.A. $15,384,615.39 38.46153847% $9,615,384.61 38.46153847% $1,923,076.92
101 N. Tryon Street
Independence Center, 15th
Floor NC1-001-15-04
Charlotte, North Carolina 28255
Attn: Agency Services, William
Cessna
Telephone: (704) 386-7367
Telecopy: (704) 409-0029
Fleet Bank, N.A. $12,307,692.31 30.76923077% $ 7,692,307.69 30.76923077% $1,538,461.54
One Federal Street
MailStop: MA OF D04J
Boston, Massachusetts 02110
Attn: Thomas Engels
Phone: 617-346-4236
Fax: 617-346-4667
Summit Bank $6,153,846.15 15.38461538% $3,846,153.85 15.38461538% $769,230.77
250 Moore Street
2nd Floor
Hackensack, New Jersey 07602
Attn: George Barrow
Phone: 201-646-5025
Fax: 201-488-6185
European American Bank $6,153,846.15 15.38461538% $3,846,153.85 15.38461538% $769,230.77
335 Madison Avenue
New York, New York 10017
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Attn: Tony Tomich
Phone: 212-503-2457
Fax: 212-503-2667
______________ ___________ ______________ ____________ _____________
Total $40,000,000.00 100.00% $25,000,000.00 100.00% $5,000,000.00
</TABLE>
<PAGE>
Schedule 2.1(b)(i)
------------------
FORM OF NOTICE OF BORROWING
NationsBank, N.A. NationsBank, N.A.,
as Agent for the Lenders as Swingline Lender
101 N. Tryon Street 101 N. Tryon Street
Independence Center, 15th Floor Independence Center, 15th Floor
NC1-001-15-04 NC1-001-15-04
Charlotte, North Carolina 28255 Charlotte, North Carolina 28255
Attention: Agency Services Attention: Agency Services
RE: Credit Agreement dated as of March 12, 1999 (as amended and modified,
the "Credit Agreement") among Access Worldwide Communications, Inc.,
------ ---------
the Guarantors and Lenders identified therein and NationsBank, N.A.,
as Agent. Terms used but not otherwise defined herein shall have the
meanings provided in the Credit Agreement.
Ladies and Gentlemen:
The undersigned hereby gives notice of a request for Revolving Loan pursuant to
Section 2.1(b) of the Credit Agreement or of a request for Swingline Loan
pursuant to Section 2.3(b) of the Credit Agreement as follows:
________ Revolving Loan
________ Swingline Loan
(A) Date of Borrowing _______________________________
(which is a Business Day)
(B) Principal Amount of
Borrowing _______________________________
(C) Interest rate basis _______________________________
(D) Interest Period and the
last day thereof _______________________________
In accordance with the requirements of Section 5.2 of the Credit Agreement, the
undersigned Borrower hereby certifies that:
(a) The representations and warranties contained in the Credit Agreement
and the other Credit Documents are true and correct in all material respects as
of the date of this request, and will be true and correct after giving effect to
the requested Extension of Credit (except for those which expressly related to
an earlier date).
(b) No Default or Event of Default exists, or will exist after giving
effect to the requested Extension of Credit.
<PAGE>
(c) All conditions set forth in Section 2.1 as to the making of Revolving
Loans or in Section 2.3 as to the making of Swingline Loans, as appropriate,
have been satisfied.
Very truly yours,
ACCESS WORLDWIDE COMMUNICATIONS, INC.
By:----------------------------
Name:
Title:
4
<PAGE>
Schedule 2.1(e)
---------------
FORM OF REVOLVING NOTE
_________, 1999
FOR VALUE RECEIVED, the undersigned Borrower hereby promises to pay to the
order of ______________________, its successors and assigns, on or before the
Termination Date to the office of the Agent in immediately available funds as
provided in the Credit Agreement,
(i) in the case of Revolving Loans, such Lender's Revolving Committed
Amount or, if less, the aggregate unpaid principal amount of all Revolving
Loans owing to such Lender; and
(ii) in the case of Swingline Loans, if such lender is the Swingline
Lender, the Swingline Committed Amount or, if less, the aggregate unpaid
principal amount of all Swingline Loans owing to the Swingline Lender;
together with interest thereon at the rates and as provided in the Credit
Agreement.
This Note is one of the Revolving Notes referred to in the Credit Agreement
dated as of March 12, 1999 (as amended and modified, the "Credit Agreement")
----------------
among Access Worldwide Communications, Inc., a Delaware corporation, the
Guarantors and Lenders identified therein and NationsBank, N.A., as Agent.
Terms used but not otherwise defined herein shall have the meanings provided in
the Credit Agreement.
The holder may endorse and attach a schedule to reflect borrowings
evidenced by this Note and all payments and prepayments thereon; provided that
--------
any failure to endorse such information shall not affect the obligation of the
undersigned Borrower to pay amounts evidenced hereby.
Upon the occurrence of an Event of Default, all amounts evidenced by this
Note may, or shall, become immediately due and payable as provided in the Credit
Agreement without presentment, demand, protest or notice of any kind, all of
which are waived by the undersigned Borrower. In the event payment of amounts
evidenced by this Note is not made at any stated or accelerated maturity, the
undersigned Borrower agrees to pay, in addition to principal and interest, all
costs of collection, including reasonable attorneys' fees.
This Note and the Loans and amounts evidenced hereby may be transferred
only as provided in the Credit Agreement.
This Note shall be governed by, and construed and interpreted in accordance
with, the law of the State of North Carolina.
5
<PAGE>
In WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed as of the date first above written.
ACCESS WORLDWIDE COMMUNICATIONS, INC.,
a Delaware corporation
By:-------------------------------
Name:
Title:
6
<PAGE>
Schedule 2.2(b)
---------------
Form of Notice of Request for Letter of Credit
[Date]
NationsBank, N.A. NationsBank, N.A.
as Issuing Lender under the as Agent under the
Credit Agreement referred to below Credit Agreement referred to below
101 N. Tryon Street 101 N. Tryon Street
Independence Center, 15th Floor Independence Center, 15th Floor
NC1-001-15-04 NC1-001-15-04
Charlotte, North Carolina 28255 Charlotte, North Carolina 28255
Attention: Agency Services
Re: Credit Agreement dated as of March 12, 1999 (as amended and
modified, the "Credit Agreement") among Access Worldwide
Communications, Inc., the Guarantors and Lenders identified therein
and NationsBank, N.A., as Agent. Terms used but not otherwise
defined herein shall have the meanings provided in the Credit
Agreement.
Ladies and Gentlemen:
The undersigned, pursuant to Section 2.2(b) of the Credit Agreement, hereby
requests that the following Letter of Credit be issued on [Date] as follows:
(1) Account Party:
(2) For use by:
(3) Beneficiary:
(4) Face Amount of Letter of Credit:
(5) Date of Issuance:
Delivery of Letter of Credit should be made as follows:
In accordance with the requirements of Section 5.2 of the Credit Agreement,
the undersigned Borrower hereby certifies that:
(a) The representations and warranties contained in the Credit Agreement
and the other Credit Documents are true and correct in all material respects as
of the date of this request, and will be true and correct after giving effect to
the requested Extension of Credit (except for those which expressly relate to an
earlier date).
(b) No Default or Event of Default exists, or will exist after giving
effect to the requested Extension of Credit.
7
<PAGE>
(c) All conditions set forth in Section 2.2 as to the issuance of a Letter
of Credit have been satisfied.
Very truly yours,
ACCESS WORLDWIDE COMMUNICATIONS, INC.
By:_________________________________
Name:
Title:
8
<PAGE>
Schedule 2.4(d)
---------------
FORM OF TERM NOTE
$__________ _________, 1999
FOR VALUE RECEIVED, the undersigned Borrower, hereby promises to pay to the
order of ______________________, and its successors and assigns, in such amounts
and on such dates as set forth in the Credit Agreement to the office of the
Agent in immediately available funds as provided in the Credit Agreement, such
Lender's Term Loan Committed Amount, together with interest thereon at the rates
and as provided in the Credit Agreement.
This Note is one of the Term Notes referred to in the Credit Agreement
dated as of March 12, 1999 (as amended and modified, the "Credit Agreement")
----------------
among Access Worldwide Communications, Inc., a Delaware corporation, the
Guarantors and Lenders identified therein and NationsBank, N.A., as Agent.
Terms used but not otherwise defined herein shall have the meanings provided in
the Credit Agreement.
The holder may endorse and attach a schedule to reflect borrowings
evidenced by this Note and all payments and prepayments thereon; provided that
--------
any failure to endorse such information shall not affect the obligation of the
undersigned Borrower to pay amounts evidenced hereby.
Upon the occurrence of an Event of Default, all amounts evidenced by this
Note may, or shall, become immediately due and payable as provided in the Credit
Agreement without presentment, demand, protest or notice of any kind, all of
which are waived by the undersigned Borrower. In the event payment of amounts
evidenced by this Note is not made at any stated or accelerated maturity, the
undersigned Borrower agrees to pay, in addition to principal and interest, all
costs of collection, including reasonable attorneys' fees.
This Note and the Loans and amounts evidenced hereby may be transferred
only as provided in the Credit Agreement.
This Note shall be governed by, and construed and interpreted in accordance
with, the law of the State of North Carolina.
In WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed as of the date first above written.
ACCESS WORLDWIDE COMMUNICATIONS, INC.,
a Delaware corporation
By:----------------------------------
Name:
Title:
9
<PAGE>
Schedule 3.2
-------------
Form of Notice of Extension/Conversion
NationsBank, N.A.,
as Agent for the Lenders
101 N. Tryon Street
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Re: Credit Agreement dated as of March 12, 1999 (as amended and modified,
the "Credit Agreement") among Access Worldwide Communications, Inc.,
----------------
the Guarantors and Lenders identified therein and NationsBank, N.A.,
as Agent. Terms used but not otherwise defined herein shall have the
meanings provided in the Credit Agreement.
Ladies and Gentlemen:
The undersigned hereby gives notice pursuant to Section 3.2 of the Credit
Agreement that it requests an extension or conversion of a Loan outstanding
under the Credit Agreement, and in connection therewith sets forth below the
terms on which such extension or conversion is requested to be made:
________ Revolving Loan
________ Term Loan
(A) Date of Extension or Conversion
(which is the last day of the
applicable Interest Period) _______________________________
(B) Principal Amount of
Extension or Conversion _______________________________
(C) Interest rate basis _______________________________
(D) Interest Period and the
last day thereof _______________________________
In accordance with the requirements of Section 5.2 of the Credit Agreement,
the undersigned Borrower hereby certifies that:
(a) The representations and warranties contained in the Credit Agreement
and the other Credit Documents are true and correct in all material
respects as of the date of this request, and will be true and correct after
giving effect to the requested Extension of Credit (except for those which
expressly relate to an earlier date).
10
<PAGE>
(b) No Default or Event of Default exists, or will exist after giving
effect to the requested Extension of Credit.
(d) All conditions set forth in Section 2.1 as to the making of Revolving
Loans or in Section 2.3 as to the making of Swingline Loans, as
appropriate, have been satisfied.
Very truly yours,
ACCESS WORLDWIDE COMMUNICATIONS, INC.
By:__________________________________
Name:
Title:
11
<PAGE>
Schedule 5.1(g)(v)
------------------
Secretary's Certificate
Pursuant to Section 5.1(g)(v) of the Credit Agreement (the "Credit
------
Agreement"), dated as of March __, 1999, among Access Worldwide Communications,
- ---------
Inc., a Delaware corporation, the Guarantors and Lenders identified therein and
NationsBank, N.A., as Agent, the undersigned ) ___________________________
Secretary of ____________________ (the "Corporation") hereby certifies as
-----------
follows:
1. Attached hereto as Annex I is a true and complete copy of resolutions
duly adopted by the Board of Directors of the Corporation on
_______________________, 199_. The attached resolutions have not been rescinded
or modified and remain in full force and effect. The attached resolutions are
the only corporate proceedings of the Corporation now in force relating to or
affecting the matters referenced to therein.
2. Attached hereto as Annex II is a true and complete copy of the By-laws
of the Corporation as in effect on the date hereof.
3. Attached hereto as Annex III is a true and complete copy of the
Certificate of Incorporation of the Corporation and all amendments thereto as in
effect on the date hereof.
4. The following persons are now duly elected and qualified officers of
the Corporation, holding the offices indicated, and the signature appearing
opposite his name below is his true and genuine signature, and such officer is
duly authorized to execute and deliver on behalf of the Corporation, the Credit
Agreement, the Notes to be issued pursuant thereto and the other Credit
Documents and to act as a Responsible Officer on behalf of the Corporation under
the Credit Agreement.
Name Office Signature
- ---- ------ ---------
________________________
________________________
IN WITNESS WHEREOF, the undersigned has hereunto set his/her name and
affixed the corporate seal of the Corporation.
_____________________________
Secretary
(CORPORATE SEAL)
Date: _______________________, 1999
I, _____________________, ___________________ of _________________________,
hereby certify that _____________________, whose genuine signature appears
above, is, and has been at all
12
<PAGE>
times since ______________________, a duly elected, qualified and acting
____________________ of _______________________________________.
_______________________________ of
__________________________________
______________________________, 1999
13
<PAGE>
Schedule 6.6
-------------
Description of Legal Proceedings
14
<PAGE>
Schedule 6.8
------------
Existing Liens
15
<PAGE>
Schedule 6.14
--------------
Subsidiaries
16
<PAGE>
Schedule 7.2(b)
---------------
Form of Officer's Compliance Certificate
This Certificate is delivered in accordance with the provisions of Section
7.2(b) of that Credit Agreement dated as of March 12, 1999 (as amended, modified
and supplemented, the "Credit Agreement") among Access Worldwide Communications,
----------------
Inc., a Delaware corporation, the Guarantors and Lenders identified therein, and
NationsBank, N.A., as Agent. Terms used but not otherwise defined herein shall
have the same meanings provided in the Credit Agreement.
The undersigned, being a Responsible Officer of Access Worldwide
Communications, Inc., a Delaware corporation, hereby certifies, in my official
capacity and not in my individual capacity, that to the best of my knowledge and
belief:
(a) the financial statements accompanying this Certificate fairly present
the financial condition of the parties covered by such financial statements in
all material respects;
(b) during the period the Credit Parties have observed or performed all of
their covenants and other agreements in all material respects, and satisfied in
all material respects every material condition, contained in this Credit
Agreement to be observed, performed or satisfied by them;
(c) the undersigned has no actual knowledge of any Default or Event of
Default; and
(d) detailed calculations demonstrating compliance with the financial
covenants set out in Section 7.9 of the Credit Agreement accompanying this
Certificate.
This the _______________ day of ________________________, 199_.
ACCESS WORLDWIDE COMMUNICATIONS, INC.
By:___________________________________
Name:
Title:
17
<PAGE>
Attachment to Officer's Certificate
-----------------------------------
Computation of Financial Covenants
18
<PAGE>
Schedule 7.11-1
---------------
Form of Joinder Agreement
THIS JOINDER AGREEMENT (the "Agreement"), dated as of ___________________,
---------
199_, is by and between _______________________, a __________________ (the
"Applicant Guarantor"), and NATIONSBANK, N.A., in its capacity as Agent under
- --------------------
that certain Credit Agreement dated as of March 12, 1999 (as amended and
modified, the "Credit Agreement") by and among Access Worldwide Communications,
----------------
Inc., a Delaware corporation, the Guarantors and Lenders identified therein and
NationsBank, N.A., as Agent. All of the defined terms in the Credit Agreement
are incorporated herein by reference.
The Applicant Guarantor has indicated its desire to become a Guarantor or
is required by the terms of Section 7.11 of the Credit Agreement to become a
Guarantor under the Credit Agreement.
Accordingly, the Applicant Guarantor hereby agrees as follows with the
Agent for the benefit of the Lenders:
1. The Applicant Guarantor hereby acknowledges, agrees and confirms that,
by its execution of this Agreement, the Applicant Guarantor will be deemed to be
a party to the Credit Agreement and a "Guarantor" for all purposes of the Credit
Agreement and the other Credit Documents, and shall have all of the obligations
of a Guarantor thereunder as if it had executed the Credit Agreement and the
other Credit Documents. The Applicant Guarantor agrees to be bound by all of
the terms, provisions and conditions contained in the Credit Documents,
including without limitation (i) all of the affirmative and negative covenants
set forth in Sections 7 and 8 of the Credit Agreement and (ii) all of the
undertakings and waivers set forth in Section 4 of the Credit Agreement.
Without limiting the generality of the foregoing terms of this paragraph 1, the
Applicant Guarantor hereby (A) jointly and severally together with the other
Guarantors, guarantees to each Lender, the Agent and the Issuing Lender as
provided in Section 4 of the Credit Agreement, the prompt payment and
performance of the Guaranteed Obligations in full when due (whether at stated
maturity, as a mandatory prepayment, by acceleration, as a mandatory cash
collateralization or otherwise) strictly in accordance with the terms thereof,
(B) agrees that if any of the Guaranteed Obligations are not paid or performed
in full when due (whether at stated maturity, as a mandatory prepayment, by
acceleration, as a mandatory cash collateralization or otherwise), the Applicant
Guarantor will, jointly and severally together with the other Guarantors,
promptly pay and perform the same, without any demand or notice whatsoever, and
that in the case of any extension of time of payment or renewal of any of the
Guaranteed Obligations, the same will be promptly paid in full when due (whether
at extended maturity, as a mandatory prepayment, by acceleration, as a mandatory
cash collateralization or otherwise) in accordance with the terms of such
extension or renewal, (C) grants to the Agent a security interest in its
Collateral as referred in, and pursuant to the terms of, the Security Agreement,
and (D) pledges and grants a security interest to the Agent in the Pledged Stock
identified in Schedule A attached and the other Collateral as referred in, and
----------
pursuant to the terms of, the Pledge Agreement.
2. The Applicant Guarantor acknowledges and confirms that it has received
a copy of the Credit Agreement and the Schedules and Exhibits thereto. The
information on the Schedules to the Credit Agreement, the Security Agreement and
the Pledge Agreement are amended to provide the information shown on the
attached Schedule A.
----------
19
<PAGE>
3. The Applicant Guarantor hereby waives acceptance by the Agent and the
Lenders of the guaranty by the Applicant Guarantor under Section 4 of the Credit
Agreement upon the execution of this Joinder Agreement by the Applicant
Guarantor.
4. This Agreement may be executed in two or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute one contract.
5. This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of North Carolina.
IN WITNESS WHEREOF, the Applicant Guarantor has caused this Joinder
Agreement to be duly executed by its authorized officers, and the Agent, for the
benefit of the Lenders, has caused the same to be accepted by its authorized
officer, as of the day and year first above written.
APPLICANT GUARANTOR
By: ______________________________
Name:
Title:
Address for Notices:
Attn:
Telephone:
Telecopy:
Acknowledged and accepted:
NATIONSBANK, N.A., as Agent
By: ______________________________
Name:
Title:
20
<PAGE>
Schedule A
----------
to
Joinder Agreement
Schedule 1 to Security Agreement
--------------------------------
Chief Executive Office and Locations of Collateral
Chief Executive Locations of Record
Applicant Guarantor Office Collateral Owner
------------------- ------ ---------- -----
Schedule 1 to Pledge Agreement
------------------------------
Description of Pledged Shares
No. of Certificate
Pledgor/Applicant Guarantor Issuer Shares No. Percentage
--------------------------- ------ ------ --- ----------
<PAGE>
Schedule 8.1
------------
Indebtedness
<PAGE>
Schedule 8.5
------------
Existing Investments
<PAGE>
Schedule 11.1
-------------
Schedule of Lenders' Addresses
<PAGE>
Schedule 11.3(b)
----------------
Form of Assignment and Acceptance
THIS ASSIGNMENT AND ACCEPTANCE dated as of ________, 199_ is entered into
between THE LENDER IDENTIFIED ON THE SIGNATURE PAGES AS THE "ASSIGNOR" (the
"Assignor") and THE PARTIES IDENTIFIED ON THE SIGNATURE PAGES AS "ASSIGNEES"
- ---------
("Assignee").
- ----------
Reference is made to that Credit Agreement dated as of March 12, 1999 (as
amended and modified, the "Credit Agreement") among Access Worldwide
----------------
Communications, Inc., a Delaware corporation (the "Borrower"), the Guarantors
--------
and Lenders identified therein and NationsBank, N.A., as Agent. Terms defined
in the Credit Agreement are used herein with the same meanings.
1. The Assignor hereby sells and assigns, without recourse, to the
Assignees, and the Assignees hereby purchase and assume, without recourse, from
the Assignor, effective as of the Effective Date shown below, those rights and
interests of the Assignor under the Credit Agreement identified below (the
"Assigned Interests"), including the Obligations and Commitments relating
- -------------------
thereto, together with unpaid interest and fees relating thereto accruing from
the Effective Date. The Assignor represents and warrants that it owns interests
assigned hereby free and clear of liens, encumbrances or other claims. Each of
the Assignees represents that it is an assignee permitted under Section 11.3 of
the Credit Agreement. The Assignor and each of the Assignees hereby makes and
agrees to be bound by all the representations, warranties and agreements set
forth in Section 11.3 of the Credit Agreement, a copy of which has been received
by each such party. From and after the Effective Date (i) each Assignee, if it
is not already a Lender under the Credit Agreement, shall be a party to and be
bound by the provisions of the Credit Agreement and, to the extent of the
interests assigned by this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) each Assignor shall, to the extent
of the interests assigned by this Assignment and Acceptance, relinquish its
rights and be released from its obligations under the Credit Agreement (other
than the rights of indemnification referenced in Section 11.9 of the Credit
Agreement). Schedule 2.1(a) is deemed modified and amended to the extent
---------------
necessary to give effect to this Assignment.
2. This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of North Carolina.
3. Terms of Assignment
(a) Date of Assignment: ___________, 199__
(b) Legal Name of Assignor: SEE SIGNATURE PAGE
(c) Legal Name of Assignee: SEE SIGNATURE PAGE
(d) Effective Date of Assignment: ___________, 199__
See Schedule I attached for a description of the Loans, Obligations and
----------
Commitments (and the percentage interests therein and relating thereto) which
are the subject of this Assignment and Acceptance.
4. The fee payable to the Agent in connection with this Assignment is
enclosed.
IN WITNESS WHEREOF, the parties hereto have caused the execution of this
instrument by their duly authorized officers as of the date first above written.
<PAGE>
ASSIGNOR: ASSIGNEE:
-------- --------
By:________________________ By:_________________________
Name: Name:
Title: Title:
Address for Notices:
-------------------
ACKNOWLEDGMENT AND CONSENT
- --------------------------
NATIONSBANK, N.A. ACCESS WORLDWIDE COMMUNICATIONS, INC.
as Agent
By:___________________________ By:_________________________
Name: Name:
Title: Title:
<PAGE>
SCHEDULE I
----------
TO ASSIGNMENT AND ACCEPTANCE
ACCESS WORLDWIDE COMMUNICATIONS, INC.
REVOLVING LOANS, TERM LOANS AND LETTERS OF CREDIT PRIOR TO ASSIGNMENT
<TABLE>
<CAPTION>
Revolving Revolving Revolving Term Term Loan Term LOC LOC
Committed Commitment Loans Loan Commitment Loans Committed Obligations
Amount Percentage Outstanding Commitment Percentage Outstanding Amount Outstanding
--------- ---------- ----------- ---------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSIGNOR
- --------
ASSIGNEES
- ---------
-------------------------------------------------------------------------------------------------
$ $ $ $
</TABLE>
<PAGE>
SCHEDULE I
----------
TO ASSIGNMENT AND ACCEPTANCE
ACCESS WORLDWIDE COMMUNICATIONS, INC.
REVOLVING LOANS, TERM LOANS AND LETTERS OF CREDIT INTERESTS SUBJECT TO THIS
ASSIGNMENT
<TABLE>
<CAPTION>
Revolving Revolving Revolving Term Term Loan Term LOC LOC
Committed Commitment Loans Loan Commitment Loans Committed Obligations
Amount Percentage Outstanding Commitment Percentage Outstanding Amount Outstanding
--------- ---------- ----------- ---------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSIGNOR
- -----------
ASSIGNEES
- -----------
-------------------------------------------------------------------------------------------------
$ $ $ $
</TABLE>
<PAGE>
SCHEDULE I
----------
TO ASSIGNMENT AND ACCEPTANCE
ACCESS WORLDWIDE COMMUNICATIONS, INC.
REVOLVING LOANS, TERM LOANS AND LETTERS OF CREDIT AFTER ASSIGNMENT
<TABLE>
<CAPTION>
Revolving Revolving Revolving Term Term Loan Term LOC LOC
Committed Commitment Loans Loan Commitment Loans Committed Obligations
Amount Percentage Outstanding Commitment Percentage Outstanding Amount Outstanding
--------- ---------- ----------- ---------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSIGNOR
- --------
ASSIGNEES
- ---------
-------------------------------------------------------------------------------------------------
$ $ $ $
</TABLE>
8
<PAGE>
SCHEDULE I
----------
TO ASSIGNMENT AND ACCEPTANCE
ACCESS WORLDWIDE COMMUNICATIONS, INC.
REVOLVING LOANS, TERM LOANS AND LETTERS OF CREDIT AFTER ASSIGNMENT
<TABLE>
<CAPTION>
Revolving Revolving Revolving Term Term Loan Term LOC LOC
Committed Commitment Loans Loan Commitment Loans Committed Obligations
Amount Percentage Outstanding Commitment Percentage Outstanding Amount Outstanding
--------- ---------- ----------- ---------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSIGNOR
- --------
ASSIGNEES
- ---------
-------------------------------------------------------------------------------------------------
$ $ $ $
</TABLE>
9
<PAGE>
EXHIBIT 10(r)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made the 24th day of September, 1997 by and between
CulturalAccessWorldwide Inc., a Delaware corporation (the "Company"), and Isabel
Valdes (the "Employee").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company wishes to assure itself of the services of the
Employee, and the Employee wishes to serve in the employ of the Company, upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Employment, Term.
----------------
1.1 The Company agrees to employ the Employee, and the Employee
agrees to serve in the employ of the Company, for the term set forth in Section
1.2, in the position and with the responsibilities, duties and authority set
forth in Section 2 and on the other terms and conditions set forth in this
Agreement.
1.2 The term of the Employee's employment under this Agreement shall
be the period commencing on the date hereof and continuing through September 30,
2000, unless sooner terminated in accordance with this Agreement.
2. Position, Duties. The Employee shall serve the Company as
----------------
President of the Market Connections Group of the Company and will be a member of
the executive management board of the Company. The Employee shall report to,
and shall have such duties and responsibilities consistent with such position as
are reasonably requested of her by the President of the Company, or his designee
or successor. The Employee shall perform her duties and responsibilities
hereunder faithfully and diligently. The Employee shall devote her full
business time and attention to the performance of her duties and
responsibilities hereunder. The Employee hereby represents that she is not
bound by any confidentiality agreements or restrictive covenants which restrict
or may restrict her ability to perform her duties hereunder, and agrees that she
will not enter into any such agreements or covenants during the term of her
employment hereunder, except such restrictive covenants or confidentiality
agreements which are required by the Company. The Employee shall be based in
the Palo Alto, California area. Notwithstanding anything to the contrary
contained herein, it is understood and agreed that the Employee may serve on
boards of directors of other companies and organizations so long as such other
companies and organizations do not, directly or indirectly, compete with the
Company or any member of the Company Group (as hereinafter defined). The
Company acknowledges that
<PAGE>
prior to the date hereof the Employee has assisted other businesses on a
contingent fee basis and that any such contingent fees payable to the Employee
for services rendered prior to the date hereof are and shall be the property of
the Employee.
3. Compensation.
------------
3.1 Base Salary. During the term of this Agreement, in consideration
-----------
of the performance by the Employee of the services set forth in Section 2 and
her observance of the other covenants set forth herein, the Company shall pay
the Employee, and the Employee shall accept, a base salary at the rate of
$100,000 per annum, payable in accordance with the standard payroll practices of
the Company. In addition to the base salary payable hereunder, the Employee may
be entitled to receive merit increases in salary during the term hereof in
amounts and at such times as shall be determined by the President of the Company
in his sole discretion. In no event shall the failure to grant any such
increase (or the amount of any such increase) give rise to a claim by the
Employee under this Agreement.
3.2 Other Compensation. (i) The Employee shall be granted employee
------------------
stock options to purchase 30,000 shares of common stock, $.01 par value per
share ("Company Common Stock"), of the Company pursuant to the Company's
employee stock option plan. Such options shall vest ratably on the anniversary
of the date hereof over a three-year period contingent upon continued
employment; provided, however, that, in accordance with the option certificate
for such options, in the event that the Employee's employment hereunder is
terminated as a result of the Employee's death or disability, such options shall
fully vest. The option price shall be $6.00 per share. Such options shall be
fully subject to the terms and conditions of the stock option plan of the
Company governing such options.
(ii) In addition, the Employee shall be eligible to receive an annual
bonus of up to $45,000 of her base salary based on an annual performance review
by the Board of Directors of the Company.
4. Expense Reimbursement. During the term of the Employee's
---------------------
employment by the Company pursuant to this Agreement, consistent with the
Company's policies and procedures as may be in effect from time to time, the
Company shall reimburse the Employee for all reasonable and necessary out-of-
pocket expenses incurred by her in connection with the performance of her duties
hereunder, upon the presentation of proper accounts therefor in accordance with
the Company's policies.
5. Other Benefits. During the term of the Employee's employment by
--------------
the Company pursuant to this Agreement, the Employee shall be entitled to
receive five weeks paid vacation time per annum and such other benefits and
customary medical and life insurance as are from time to time made available to
other similarly situated employees of the Company, on the same terms as are
available to such similarly situated employees, it being understood that the
Employee shall be required to make the same contributions and payments in order
to receive any of such benefits as may be required of such similarly situated
employees.
6. Termination of Employment.
-------------------------
2
<PAGE>
6.1 Death. In the event of the death of the Employee during the term
-----
of this Agreement, the Company shall pay to the estate or other legal
representative of the Employee the salary provided for in Section 3.1 (at the
annual rate then in effect) accrued to the Employee's date of death and not
theretofore paid, and the estate or other legal representative of the Employee
shall have no further rights under this Agreement.
6.2 Disability. If the Employee shall become incapacitated by reason
----------
of sickness, accident or other physical or mental disability and shall for a
period of thirty (30) consecutive days be unable to perform her normal duties
hereunder, with or without reasonable accommodation, the employment of the
Employee hereunder may be terminated by the Company upon thirty (30) days' prior
written notice to the Employee. Promptly after such termination, the Company
shall pay to the Employee the salary provided for in Section 3.1 (at the annual
rate then in effect) accrued to the date of such termination and not theretofore
paid. Neither the Employee nor the Company shall have any further rights or
obligations under this Agreement, except as provided in Sections 7, 8, 9 and 10.
6.3 Due Cause. The employment of the Employee hereunder may be
---------
terminated by the Company at any time during the term of this Agreement for Due
Cause (as hereinafter defined). In the event of such termination, the Company
shall pay to the Employee the salary provided for in Section 3.1 (at the annual
rate then in effect) accrued to the date of such termination and not theretofore
paid to the Employee, and, after the satisfaction of any claim of the Company
against the Employee arising as a direct and proximate result of such Due Cause,
neither the Employee nor the Company shall have any further rights or
obligations under this Agreement, except as provided in Sections 7, 8, 9 and 10.
For purposes hereof, "Due Cause" shall mean (a) a material breach of any of the
Employee's obligations hereunder (it being understood that any breach of the
provisions of Sections 2, 7, 8 or 9 hereof shall be considered material);(b) the
use of alcohol, or unprescribed drugs by the Employee to an extent that such use
interferes with the performance by the Employee of her responsibilities
hereunder; or (c) that the Employee repeatedly or intentionally causes damage to
the relations of any member of the Company Group with its clients, suppliers or
employees; or (d) the continued refusal by the Employee to carry out any
reasonable lawful order or instruction of the Company or the repeated commission
of other acts of insubordination; or (e) that the Employee, in carrying out her
duties hereunder, has been guilty of (i) willful or gross neglect or (ii)
willful or gross misconduct, resulting in either case in material harm to any
member of the Company Group (as hereinafter defined); or (f) that the Employee
has been charged with (i) a felony or (ii) any lesser crime or offense involving
moral turpitude. In the event of an occurrence under this Section 6.3, the
Employee shall be given written notice by the Company that it intends to
terminate the Employee's employment for Due Cause under this Section, which
written notice shall specify the act or acts upon the basis of which the Company
intends so to terminate the Employee's employment. If the basis for such
written notice is an act or acts described in clause (a) or (b) above (and not
involving moral turpitude), the Employee shall be given ten (10) days to cease
or correct the performance (or nonperformance) giving rise to such written
notice and, upon failure of the Employee within such ten (10) days to cease or
correct such performance (or nonperformance), the Employee's employment by the
Company shall automatically be terminated hereunder for Due Cause.
3
<PAGE>
6.4 Other Termination by the Company. The Company may terminate the
--------------------------------
Employee's employment prior to the expiration of the term of this Agreement for
whatever reason it deems appropriate; provided, however, that in the event that
such termination is not pursuant to Sections 6.1, 6.2 or 6.3, the Company shall
continue to pay to the Employee (or her estate or other legal representative in
the case of the death of the Employee subsequent to such termination), in the
same periodic installments as her annual salary was paid, the salary provided
for in Section 3.1 (at the annual rate then in effect) until the earlier of (a)
the then scheduled expiration of the term hereof or (b) six (6) months following
the date of such termination plus one (1) additional month for each full year of
service hereunder. Neither the Employee nor the Company shall have any further
rights or obligations under this Agreement, except as provided in Sections 7, 8,
9 and 10.
6.5 Rights to Benefits. Upon termination of employment under any
------------------
provision contained in this Section 6, rights and benefits of the Employee, her
estate or other legal representative under the employee benefit plans and
programs of the Company, if any, will be determined in accordance with the terms
and provisions of such plans and programs. Neither the Employee nor the Company
shall have any further rights or obligations under this Agreement, except as
provided in Sections 7, 8, 9 and 10.
7. Confidential Information.
------------------------
7.1 (a) The Employee shall, during the Employee's employment with
the Company and at all times thereafter, treat all confidential material (as
hereinafter defined) of the Company or any of the Company's subsidiaries,
affiliates or parent entities (the Company and the Company's subsidiaries,
affiliates and parent entities being hereinafter collectively referred to as the
"Company Group") confidentially. The Employee shall not, without the prior
written consent of the President of the Company, disclose such confidential
material, directly or indirectly, to any party, who at the time of such
disclosure is not an employee or agent of any member of the Company Group, or
remove from the Company's premises any notes or records relating thereto, copies
or facsimiles thereof (whether made by electronic, electrical, magnetic,
optical, laser, acoustic or other means), or any other property of any member of
the Company Group. The Employee agrees that all confidential material, together
with all notes and records of the Employee relating thereto, and all copies or
facsimiles thereof in the possession of the Employee (whether made by the
foregoing or other means) are the exclusive property of the Company.
(b) For the purposes hereof, the term "confidential material" shall
mean all information in any way concerning the activities, business or affairs
of any member of the Company Group or any of the customers of any member of the
Company Group, including, without limitation, information concerning trade
secrets, together with all sales and financial information concerning any member
of the Company Group and any and all information concerning projects in research
and development or marketing plans for any products or projects of the Company
Group, and all information concerning the practices and customers of any member
of the Company Group; provided, however, that the term "confidential material"
shall not include information which becomes generally available to the public
other than as a result of a disclosure by the Employee.
4
<PAGE>
7.2 Promptly upon the request of the Company, the Employee shall
deliver to the Company all confidential material relating to any member of the
Company Group in the possession of the Employee without retaining a copy
thereof, unless, in the written opinion of counsel for the Company delivered to
the Employee, either returning such confidential material or failing to retain a
copy thereof would violate any applicable Federal, state, local or foreign law,
in which event such confidential material shall be returned without retaining
any copies thereof as soon as practicable after such counsel advises in writing
to the Employee that the same may be lawfully done.
7.3 In the event that the Employee is required, by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process, to disclose any confidential material
relating to any member of the Company Group, the Employee shall provide the
Company with prompt notice thereof so that the Company may seek an appropriate
protective order and/or waive compliance by the Employee with the provisions
hereof.
8. Non-Competition.
---------------
8.1 The Employee acknowledges that the services to be rendered by her
to the Company are of a special and unique character. The Employee agrees that,
in consideration of her employment hereunder, the Employee will not, (a) (A)
during the term of this Agreement and (B) until three (3) years from the date of
termination of the Employee's employment with the Company or any other member of
the Company Group, directly or indirectly, (w) engage, whether as principal,
agent, investor, distributor, representative, stockholder, employee, consultant,
volunteer or otherwise, with or without pay, in any activity or business
venture, which is competitive with the business of providing ethnic market
research and business consulting on ethnic marketing strategies of the Company
or any member of the Company Group, (x) solicit or entice or endeavor to solicit
or entice away from any member of the Company Group any person who was during
the prior six (6) month period or is at the time of solicitation, a director,
officer, employee, agent or consultant of such member of the Company Group, on
the Employee's own account or for any person, firm, corporation or other
organization, whether or not such person would commit any breach of such
person's contract of employment by reason of leaving the service of such member
of the Company Group, (y) solicit or entice or endeavor to solicit or entice
away any of the clients or customers or active prospects of any member of the
Company Group, either on the Employee's own account or for any other person,
firm, corporation or organization, or (z) employ any person who was during the
prior six (6) month period or is at the time of solicitation, a director,
officer or employee of any member of the Company Group or any person who is
known to be in possession of any confidential information or trade secrets
relating to the business of any member of the Company Group, or (b) during the
term of this Agreement and until two (2) years from the date of termination of
the Employee's employment with the Company or any member of the Company Group,
take any action or make any statement, the effect of which would be, directly or
indirectly, to impair the good will of any member of the Company Group or the
business reputation or good name of any member of the Company Group, or be
otherwise detrimental to the Company, including any action or statement
intended, directly or indirectly, to benefit a competitor of any member of the
Company Group. The Company agrees that at any time during the term of this
Agreement and until two (2) years from the date of termination of the Employee's
employment with the
5
<PAGE>
Company or any member of the Company Group, take any action or make any
statement, the effect of which would be, directly or indirectly, to impair the
business reputation or good name of the Employee, or be otherwise detrimental to
the Employee.
8.2 The Employee and the Company agree that if, in any proceeding,
the court or authority shall refuse to enforce the covenants herein set forth
because such covenants cover too extensive a geographic area or too long a
period of time, any such covenant shall be deemed appropriately amended and
modified in keeping with the intention of the parties to the maximum extent
permitted by law.
8.3 The Employee expressly acknowledges and agrees that the covenants
and agreements set forth in this Section 8 are reasonable in all respects, and
necessary in order to protect, maintain and preserve the value and goodwill of
the Company Group, as well as the proprietary and other legitimate business
interests of the members of the Company Group. The Employee acknowledges and
agrees that the covenants and agreements of the Employee set forth in this
Section 8 constitute a significant part of the consideration given by the
Employee to the Company in exchange for the salary and benefits provided for in
this Agreement, and are a material reason for such payment.
8.4 Notwithstanding anything to the contrary contained in this
Section 8, it is understood and agreed that the Employee shall be permitted,
subsequent to the termination of the Employee's employment hereunder, to work in
an academic, in-house or general market research position.
8.5 Notwithstanding anything to the contrary contained in this
Section 8, it is understood and agreed that the restrictions set forth in clause
(a)(B)(w) of Section 8.1 hereof shall not apply in the event that the Company
has not, on or prior to the second anniversary of the date hereof, consummated
an initial public offering of the Company Common Stock.
9. Intellectual Property.
---------------------
9.1 Any and all intellectual property, inventions or software made,
developed or created by the Employee (a) during the term of this Agreement or
(b) within a period of one hundred and twenty (120) days after the termination
of the Employee's employment with the Company or any other member of the Company
Group, which reasonably relate to the business of the Company or any other
member of the Company Group or which reasonably relate to any business conducted
by the Company during the term of the Employee's employment by the Company
(each, an "Invention"), whether at the request or suggestion of the Company or
otherwise, whether alone or in conjunction with others, and whether during
regular working hours of work or otherwise, shall be promptly and fully
disclosed by the Employee to the President and/or the Board of Directors of the
Company and shall be the Company's exclusive property as against the Employee,
and the Employee shall promptly deliver to the President and/or the Board of
Directors all papers, drawings, models, data and other material relating to any
Invention made, developed or created by him as aforesaid. In addition, the
Employee covenants and agrees to disclose to the Board of Directors any
Invention developed or created by the Employee during the term of this
Agreement, whether or not such Invention
6
<PAGE>
relates to the business being conducted by the Company or any other member of
the Company Group at the time of development or creation of such Invention.
9.2 The Employee hereby expressly acknowledges and agrees that any
Invention developed or created by the Employee during the term of this Agreement
which reasonably relates to the business of the Company or any other member of
the Company Group or which reasonably relates to the business conducted by the
Company during the Employee's employment by the Company shall be considered
"works made for hire" within the meaning of the Copyright Act of 1976, as
amended (17 U.S.C. (S) 101). Each such Invention as well as all copies of such
Invention in whatever medium fixed or embodied, shall be owned exclusively by
the Company as of the date of creation.
9.3 The Employee shall, upon the Company's request and without any
payment therefor, execute any documents necessary or advisable in the opinion of
the Company's counsel to direct issuance of patents or copyrights of the Company
with respect to such Invention as are to be in the Company's exclusive property
as against the Employee under this Section 9 or to vest in the Company title to
such inventions as against the Employee, the expense of securing any such patent
or copyright, to be borne by the Company. In addition, the Employee agrees not
to file any patent, copyright or trademark applications related to such
Invention.
10. Equitable Relief. In the event of a breach or threatened breach
----------------
by the Employee of any of the provisions of Sections 7, 8 or 9 of this
Agreement, the Employee hereby consents and agrees that the Company shall be
entitled to pre-judgment injunctive relief or similar equitable relief
restraining the Employee from committing or continuing any such breach or
threatened breach or granting specific performance of any act required to be
performed by the Employee under any of such provisions, without the necessity of
showing any actual damage or that money damages would not afford an adequate
remedy and without the necessity of posting any bond or other security. The
parties hereto hereby consent to the jurisdiction of the federal courts located
in the Northern District of California and the state courts located in such
District for any proceedings under this Section 10. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies at law or
in equity which it may have.
11. Successors and Assigns.
----------------------
11.1 Assignment by the Company. The Company may assign this
-------------------------
Agreement to any member of the Company Group or to any entity which acquires
substantially all the assets and business of the Company, and the Employee
hereby consents to such assignment.
11.2 Assignment by the Employee. The Employee may not assign this
--------------------------
Agreement or any part hereof without the prior written consent of the President
of the Company.
12. Governing Law. This Agreement shall be deemed a contract made
-------------
under, and for all purposes shall be construed in accordance with, the laws of
the State of California or such other State in which the Employee's principal
business office is located if her principal
7
<PAGE>
business office no longer is in the State of California, applicable to contracts
to be performed entirely within such State.
13. Entire Agreement. This Agreement contains all the understandings
----------------
and representations between the parties hereto pertaining to the subject matter
hereof and supersede all undertakings and agreements, whether oral or in
writing, if there be any, previously entered into by them with respect thereto;
provided, however, that Section 8 shall not serve as a limitation of the terms
of any other non-competition agreement between the Employee and any member of
the Company Group.
14. Modification and Amendment; Waiver. The provisions of this
----------------------------------
Agreement may be modified, amended or waived, but only upon the written consent
of the party against whom enforcement of such modification, amendment or waiver
is sought and then such modification, amendment or waiver shall be effective
only to the extent set forth in such writing. No delay or failure on the part
of any party hereto in exercising any right, power or remedy hereunder shall
effect or operate as a waiver thereof, nor shall any single or partial exercise
thereof or any abandonment or discontinuance of steps to enforce such right,
power or remedy preclude any further exercise thereof or of any other right,
power or remedy.
15. Notices. All notices, requests or instructions hereunder shall
-------
be in writing and delivered personally, sent by telecopier or sent by registered
or certified mail, postage prepaid, as follows:
If to the Company:
2200 Clarendon Boulevard, 11th Floor
Arlington, Virginia 22201
Attention: President
Telecopy: 703-812-9552
Telephone: 800-522-3447
If to the Employee:
1329 Waverley Street
Palo Alto, California 94301
Telecopy No.: (650) 327-7024
Telephone No.: (650) 322-9991
with a copy to:
Coblentz, Cahen, McCabe & Breyer LLP
222 Kearney Street, 7th Floor
San Francisco, California 94108
Attention: Barry Reder, Esq.
Telecopy No.: (415) 989-1663
Telephone No.: (415) 391-4800
8
<PAGE>
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered or telecopied, and two business days after the date of
mailing, if mailed.
16. Arbitration. Any controversy or claim arising out of or relating
-----------
to this Agreement, or any breach hereof, shall, except as provided in Section 10
hereof, be settled by arbitration in accordance with the rules of the American
Arbitration Association then in effect and judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction thereof. The
arbitration shall be held in San Francisco, California. The arbitrator shall
award attorneys' fees to the prevailing party.
17. Expenses. Each of the parties hereto shall bear her or its own
--------
costs and expenses, including attorneys fees and disbursements, incurred in
connection with this Agreement and the transactions contemplated hereby.
18. Titles. Titles of the sections of this Agreement are intended
------
solely for convenience and no provision of this Agreement is to be construed by
reference to the title of any section.
19. Severability. Should any provision of this Agreement be held by
------------
a court of competent jurisdiction to be enforceable only if modified, such
holding shall not affect the validity of the remainder of this Agreement, the
balance of which shall continue to be binding upon the parties hereto with any
such modification to become a part hereof and treated as though originally set
forth in this Agreement. The parties further agree that any such court is
expressly authorized to modify any such unenforceable provision of this
Agreement in lieu of severing such unenforceable provision from this Agreement
in its entirety, whether by rewriting the offending provision, deleting any or
all of the offending provision, adding additional language to this Agreement, or
by making such other modifications as it deems warranted to carry out the intent
and agreement of the parties as embodied herein to the maximum extent permitted
by law. The parties expressly agree that this Agreement as so modified by the
court shall be binding upon and enforceable against each of them. In any event,
should one or more of the provisions of this Agreement be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions hereof, and if such
provision or provisions are not modified as provided above, this Agreement shall
be construed as if such invalid, illegal or unenforceable provisions had never
been set forth herein.
20. Survivorship. The respective rights and obligations of the
------------
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
* * *
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
CULTURALACCESSWORLDWIDE INC.
By /s/Liam Donohue
--------------------------------------------
Name: Liam Donohue
Title: Vice President
/s/Isabel Valdes
----------------------------------------------
Isabel Valdes
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES
TLM Holdings Corp., a Delaware corporation
Ash Creek, Inc., a Delaware corporation
Hispanic Market Connections, Inc., a California corporation
Phoenix Marketing Group (Holdings), Inc., a Delaware corporation
Sturges Pond, Inc., a Delaware corporation
TeleManagement Services, Inc., a Delaware corporation
A M Medica Communications, Ltd., a New York corporation
AWWC Texas I, L.P., a Delaware limited partnership
48
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,912,219
<SECURITIES> 0
<RECEIVABLES> 20,046,495
<ALLOWANCES> 184,801
<INVENTORY> 0
<CURRENT-ASSETS> 23,914,036
<PP&E> 8,565,188
<DEPRECIATION> 1,248,073
<TOTAL-ASSETS> 104,422,216
<CURRENT-LIABILITIES> 21,944,341
<BONDS> 0
6,500,000
0
<COMMON> 90,432
<OTHER-SE> 46,039,963
<TOTAL-LIABILITY-AND-EQUITY> 104,422,216
<SALES> 73,234,285
<TOTAL-REVENUES> 73,234,285
<CGS> 41,091,313
<TOTAL-COSTS> 41,091,313
<OTHER-EXPENSES> 23,315,088
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (382,953)
<INCOME-PRETAX> 8,072,915
<INCOME-TAX> (3,552,083)
<INCOME-CONTINUING> 4,520,832
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,520,832
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.51
</TABLE>
