<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
July 23, 1998
-------------
DETAILS CAPITAL CORP.
DETAILS, INC.
------------------------------------
(Exact name of registrant as specified in charter)
California 333-41187 33-0780382
California 333-41211 33-0779123
- ------------------------------ --------- ----------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
1231 Simon Circle, Anaheim, California 92806
- -------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 630-4077
--------------
================================================================================
<PAGE>
ITEM 2. ACQUISITION OF ASSETS
(a) In a series of transactions described more fully below, Details, Inc.
acquired 100% of the common stock, $.001 par value per share (the "DCI Stock")
of Dynamic Circuits Inc., a Delaware corporation ("DCI"). Prior to the
consummation of the transactions described below, certain Stockholders (as
defined below) owning approximately 1,796,664 shares of DCI Stock, owned
approximately 1,065,497 shares of Class A Common Stock, no par value (the "Class
A Common"), of Holdings (as defined below) and approximately 131,690 shares of
Class L Common Stock, no par value (the "Class L Common" and together with the
Class A Common, collectively the "Holdings Common Stock"), of Holdings.
As contemplated by a Stock Contribution and Merger Agreement dated as of
July 23, 1998 (the "Agreement") by and among Details Holdings Corp., a
California corporation and the indirect parent corporation of the Registrants
("Holdings"), DCI, and the stockholders of DCI (the "Stockholders"), the
following transactions occurred in the following order:
(1) In a transaction intended to qualify as an exchange under Section 351
of the Internal Revenue Code of 1986, as amended, certain Stockholders
contributed approximately 2,867,813 shares of DCI Stock to Holdings in exchange
for approximately 1,276,279 shares of Class A Common of Holdings, approximately
162,064 shares of Class L Common of Holdings, and approximately 69,599 warrants
to purchase shares of Class A Common of Holdings at an exercise price of $61.17
per share (the transactions described in this paragraph 1 being referred to
herein as the "Contribution").
(2) Holdings contributed all of the DCI Stock received by it in connection
with the Contribution to its newly-formed, wholly-owned subsidiary Details
Intermediate Holdings Corp., a California corporation ("Details Intermediate").
(3) Details Intermediate and certain Stockholders contributed all of their
DCI Stock to Details Merger Corp. I, a newly-formed Delaware corporation
("Mergerco I"), in exchange for shares of common stock, no par value, of
Mergerco I.
(4) Mergerco I merged with and into DCI in a transaction in which (i) the
outstanding shares of common stock of Mergerco I were converted into shares of
DCI Stock, (ii) the outstanding shares of DCI Stock held by Mergerco I were
canceled for no consideration, (iii) each outstanding share of DCI Stock not
held by Mergerco I was converted into the right to receive a cash payment from
the surviving corporation equal to approximately $21.35 per share, (iv) each
outstanding share of DCI Series A Cumulative Redeemable Preferred Stock, $.001
par value per share (the "Series A Preferred Stock"), was converted into the
right to receive a cash payment from the surviving corporation equal to $102.63
per share, and (v) each outstanding share of DCI Series B Redeemable Preferred
Stock, $.001 par value per share (the "Series B Preferred Stock"), remained
outstanding. Pursuant to the Agreement, vested options to acquire shares of DCI
Stock ("DCI Options") were converted into vested options to acquire shares of
-2-
<PAGE>
Holdings Common Stock, and unvested DCI Options were converted into unvested
options to acquire shares of Holdings Common Stock. In addition, Holdings, DCI
and each holder of options to purchase shares of DCI Stock entered into
agreements pursuant to which DCI made cash payments to holders of vested DCI
Options and agreed to make deferred cash payments, under certain circumstances,
to holders of unvested DCI Options. Furthermore, each holder of DCI Options was
granted a number of Cash Bonus Units under Holdings' newly adopted Bonus Plan.
(5) On the business day following the consummation of the transactions
described in (1) through (4) above, Details Intermediate contributed all of the
DCI Stock received by it in the merger described in (4) above to Details Merger
Corp. II, a newly-formed Delaware corporation ("Mergerco II"), in exchange for
common stock, no par value, of Mergerco II.
(6) Mergerco II merged with and into DCI in a transaction in which (i) the
outstanding shares of Mergerco II were converted into shares of DCI Stock, (ii)
the outstanding shares of DCI Stock held by Mergerco II were canceled for no
consideration, (iii) each outstanding share of DCI Stock not held by Mergerco II
was converted into the right to receive a cash payment from the surviving
corporation of approximately $21.35 per share, and (iv) each outstanding share
of Series B Preferred Stock remained outstanding;
(7) Holdings contributed all of the issued and outstanding capital stock of
Details Capital Corp. ("Details Capital") to Details Intermediate, its wholly
owned subsidiary.
(8) Details Intermediate contributed all of the issued and outstanding DCI
Stock to Details Capital, its wholly-owned subsidiary.
(9) Details Capital contributed all of the issued and outstanding DCI Stock
to Details, Inc., its wholly-owned subsidiary.
In order to finance the transactions described above, Details Intermediate
issued 13 1/2% Senior Discount Notes in a transaction exempt from registration
under the Securities Act of 1933, as amended, and loaned the net cash proceeds
of approximately $33.4 million to DCI in return for an intercompany note (the
"Intercompany Note"). DCI used the proceeds of the borrowing evidenced by the
Intercompany Note to repay, in part, the existing DCI senior credit facility
(the "DCI Facility"). Immediately following the merger of Mergerco II with and
into DCI, Details Intermediate contributed the Intercompany Note to DCI as a
capital contribution.
With approximately $150.6 million of the proceeds of borrowings under a new
senior credit facility (the "New Senior Credit Facility"), DCI (i) repaid the
remaining outstanding indebtedness under the DCI Facility, (ii) paid the merger
consideration for the mergers involving Mergerco I and Mergerco II, (ii) made
cash payments to the holders of DCI Options to the extent set forth in written
agreements among Holdings, DCI and such holders, and (iv) paid certain fees and
expenses. Such borrowings were incurred at various times before Holdings
contributed the
-3-
<PAGE>
capital stock of Details Capital to Details Intermediate. Additionally, with
approximately $104.4 million of borrowings incurred under the New Senior Credit
Facility and other cash available to it, Details, Inc. repaid in full the
outstanding indebtedness under its existing senior credit facility. Holdings
attributed a minimum aggregate net value of $94.0 million to the DCI Stock at
the time of its contribution to Details Capital by Details Intermediate and its
further contribution by Details Capital to Details, Inc.
Immediately prior to the consummation of the transactions described above
there were 7,073,723 shares of DCI Stock, 120,000 shares of Series A Preferred
Stock, 124,465 shares of Series B Preferred Stock and 1,417,637 DCI Options
outstanding. The amount and nature of the consideration was determined by arms-
length negotiation among the parties.
The foregoing description is qualified in its entirety by reference to the
Agreement, a copy of which is attached hereto as Exhibit 2.1 and incorporated
herein by reference.
(b) DCI, based in San Jose, is a leading domestic manufacturer of quick-
turn printed circuit boards, longer-lead printed circuit boards, backplane
assemblies, and electromechanical interconnect devices. DCI supplies these
products to over 490 customers in the telecommunications, contract
manufacturing, networking, industrial products, consumer electronics, and
automotive industries. DCI operates six manufacturing facilities strategically
located in the Western, Southern, and Northeastern United States. Details, Inc.
intends to continue to use the assets of DCI for the purposes described above.
-4-
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Financial Statements of the Acquired Businesses
(a) The required financial statements for the three years ended December
31, 1997 with respect to the acquired business referred to in Item 2
of this Report are included herewith. The required financial
statements for the unaudited six month periods ending June 30, 1998
and 1997 with respect to the acquired business referred to in Item 2
of this Report are also included herewith.
-5-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Dynamic Circuits Inc.:
We have audited the accompanying consolidated balance sheets of Dynamic Circuits
Inc. and subsidiary as of December 31, 1997 and 1996, and the related
consolidated statements of income, shareholders' equity (deficit) and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above presents fairly, in
all material respects, the financial position of Dynamic Circuits Inc. as of
December 31, 1997 and 1996, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
PricewaterhouseCoopers
San Jose, California
February 20, 1998
6
<PAGE>
DYNAMIC CIRCUITS INC.
CONSOLIDATED BALANCE SHEETS
----
<TABLE>
<CAPTION>
ASSETS 1997 1996
-------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 566,750 $ 125,311
Restricted cash 50,000
Trade accounts receivable, net of allowance for doubtful accounts of
$675,103 in 1997 and $262,095 in 1996 21,488,036 7,590,953
Inventories 9,163,985 1,234,239
Prepaid expenses and other current assets 1,354,762 121,055
Deferred taxes 961,629 359,285
-------------- --------------
Total current assets 33,585,162 9,430,843
Property and equipment, net 20,113,740 5,029,957
Other assets 5,402,292 1,478,533
Goodwill, net 8,595,050
-------------- --------------
Total assets $ 67,696,244 $ 15,939,333
============== ==============
LIABILITIES PUT WARRANTS MANDATORILY REDEEMABLE PREFERRED STOCK AND
SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Book overdraft $ 3,224,677
Accounts payable 8,595,700 $ 2,349,580
Accrued liabilities 5,825,385 2,536,782
Current portion of capital lease obligations 12,717
Long-term debt, current portion 2,850,000 3,500,000
-------------- --------------
Total current liabilities 20,495,762 8,399,079
Long-term debt, net of current portion 64,050,000 29,625,000
-------------- --------------
Total liabilities 84,545,762 38,024,079
-------------- --------------
Commitments and contingencies (Note 8).
Put warrants 2,626,406 1,639,000
Mandatorily redeemable preferred stock Authorized:
Series A:
Issued and outstanding: 120,000 shares in 1997 and in 1996
(Liquidation value of $12,088,000 in 1997 and $12,536,000 in 1996) 10,506,006 10,612,000
Series B:
Issued and outstanding: 124,465 shares in 1997 and no shares in
1996
(Liquidation value of $1,224,650 in 1997 and none in 1996) 1,072,379
14,204,791 12,251,000
-------------- --------------
Common stock, $0.001 par value 1997 and $0.001 in 1996
Authorized: 1,000,000 shares in 1997 and 1996
Issued and outstanding: 53,854 in 1997 and 50,283 in 1996 54 50
Additional paid-in capital 6,542,512 5,371,606
Note receivable from shareholder (202,124)
Deferred compensation (656,888) (697,937)
Distribution in excess of net book value (see Note 1) (36,877,611) (36,877,611)
Retained earnings (accumulated deficit) 139,748 (2,131,854)
-------------- --------------
Total shareholders' equity (deficit) (31,054,309) (34,335,746)
-------------- --------------
Total liabilities, put warrants, mandatorily redeemable
preferred stock and shareholders' equity (deficit) $ 67,696,244 $ 15,939,333
============== ==============
</TABLE>
7
<PAGE>
DYNAMIC CIRCUITS INC.
CONSOLIDATED STATEMENTS OF INCOME
----
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------
1997 1996 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Sales $ 86,098,472 $ 51,431,668 $ 35,975,725
Cost of sales 54,201,347 28,069,279 20,533,414
----------------- ----------------- -----------------
Gross profit 31,897,125 23,362,389 15,442,311
----------------- ----------------- -----------------
Operating expenses:
Sales and marketing 4,431,214 2,349,327 1,964,015
General and administrative 13,839,364 8,659,053 5,321,854
Non-recurring charges 4,441,352
----------------- ----------------- -----------------
18,270,578 15,449,732 7,285,869
----------------- ----------------- -----------------
Operating income 13,626,547 7,912,657 8,156,442
Other income 63,151
Interest expense, net (3,872,450) (1,455,740) (262,445)
----------------- ----------------- -----------------
Income before taxes and extraordinary 9,817,248 6,456,917 7,893,997
item
Income tax expense 4,112,315 1,416,577 123,004
----------------- ----------------- -----------------
Income before extraordinary item 5,704,933 5,040,340 7,770,993
Extraordinary gain (loss) on retirement of debt,
net of tax (633,013) 306,274
----------------- ----------------- -----------------
Net income before accretion 5,071,920 5,040,340 8,077,267
Accretion of mandatorily redeemable preferred stock
and put warrants 2,800,318 536,000
----------------- ----------------- -----------------
Net income available to common
shareholders $ 2,271,602 $ 4,504,340 $ 8,077,267
================= ================= =================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
8
<PAGE>
DYNAMIC CIRCUITS INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
for the years ended December 31, 1997, 1996 and 1995
----
<TABLE>
<CAPTION>
Notes
Common Stock Additional Receivable
--------------------- Paid-In from Deferred
Shares Amount Capital Shareholder Compensation
-------- --------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1995 168,794 $496,749 $ (7,410)
Options exercised 6,180 30,900 (14,820)
Warrants exercised 27,776 6,944
Shareholder distribution to common stockholders
Net income
-------- --------- -----------
Balances, December 31, 1995 202,750 534,593 (22,230)
Options exercised 2,962 14,810
Shareholder distribution to common stockholders
Compensation expense relating to redemption of outstanding
option for cash $ 308,219
Compensation expense relating to transfer of shares to
employees 1,049,910
Deferred compensation related to stock option grants 2,056,478 $ (2,056,478)
Amortization of deferred compensation 1,358,541
Repayment of shareholder note 22,230
Issuance of common stock 15,482 34,654 2,222,734
Recapitalization and distribution to shareholders (170,911) (584,007) (265,735)
Accretion of mandatorily redeemable preferred stock
Net income
-------- --------- ------------ ----------- -------------
Balances, December 31, 1996 50,283 50 5,371,606 - (697,937)
Option exercised 1,480 1 7,399
Deferred compensation 198,237 (198,237)
Amortization of deferred compensation 239,286
Issuance of common stock in connection with acquisition of
Cuplex 1,314 2 763,147
Issuance of restricted stock 777 1 202,123 (202,124)
Accretion and dividends on mandatorily redeemable preferred
stock
Accretion of put warrants
Net income
-------- --------- ------------ ----------- -------------
Balances, December 31, 1997 53,854 $ 54 $ 6,542,512 $ (202,124) $ (656,888)
======== ========= ============ =========== =============
<CAPTION>
Distribution Retained
in Excess Earnings Shareholders'
of Net (Accumulated) Equity
Book Value (Deficit) (Deficit)
------------ ------------- -------------
<S> <C> <C> <C>
Balances, January 1, 1995 $ 1,012,222 $ 1,501,561
Options exercised 16,080
Warrants exercised 6,944
Shareholder distribution to common stockholders (2,269,377) (2,269,377)
Net income 8,077,267 8,077,267
------------ -------------
Balances, December 31, 1995 6,820,112 7,332,475
Options exercised 14,810
Shareholder distribution to common stockholders (5,186,411) (5,186,411)
Compensation expense relating to redemption of outstanding 308,219
option for cash
Compensation expense relating to transfer of shares to 1,049,910
employees
Deferred compensation related to stock option grants -
Amortization of deferred compensation 1,358,541
Repayment of shareholder note 22,230
Issuance of common stock 2,257,388
Recapitalization and distribution to shareholders $(36,877,611) (8,269,895) (45,997,248)
Accretion of mandatorily redeemable preferred stock (536,000) (536,000)
Net income 5,040,340 5,040,340
------------- ------------ -------------
Balances, December 31, 1996 (36,877,611) (2,131,854) (34,335,746)
Option exercised 7,400
Deferred compensation -
Amortization of deferred compensation 239,286
Issuance of common stock in connection with acquisition of 763,149
Cuplex
Issuance of restricted stock -
Accretion and dividends on mandatorily redeemable preferred (1,812,912) (1,812,912)
stock
Accretion of put warrants (987,406) (987,406)
Net income 5,071,920 5,071,920
------------- ------------ -------------
Balances, December 31, 1997 $(36,877,611) $ 139,748 $(31,054,309)
============= ============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
9
<PAGE>
DYNAMIC CIRCUITS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
----
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 5,071,920 $ 5,040,340 $ 8,077,267
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 3,510,940 2,128,500 1,578,228
Amortization 388,816 84,333 22,685
Allowance for (recovery of) doubtful accounts 235,051 (5,923) 203,938
Allowance for (recovery of) excess and obsolete inventory (76,090)
Deferred compensation expense 239,286 2,716,670
Gain on disposal of fixed asset (47,123)
Extraordinary loss (gain), gross 1,055,023 (306,274)
Changes in current assets and liabilities:
Accounts receivable (2,696,804) (2,053,180) (2,154,095)
Inventories 58,031 (219,767) (694,655)
Prepaid expenses and other assets (1,706,091) (65,987) 120,504
Deferred taxes (364,568) (359,285)
Book overdrafts 2,524,984
Accounts payable (3,809,862) (30,700) (36,440)
Accrued liabilities 1,188,639 903,339 100,958
------------ ------------ -----------
Net cash provided by operating activities 5,572,152 8,138,340 6,912,116
------------ ------------ -----------
Cash flows from investing activities:
Acquisition of property and equipment (6,523,064) (3,135,662) (2,459,351)
Disposal of property and equipment 193,544
Acquisition of other assets (115,300) (83,925)
Acquisition of subsidiary, net of cash acquired (28,902,494)
------------ ------------ -----------
Net cash used in investing activities (35,232,014) (3,250,962) (2,543,276)
------------ ------------ -----------
Cash flows from financing activities:
Increase in restricted cash (50,000)
Proceeds from issuance of mandatorily redeemable preferred stock 11,000,400
Proceeds from issuance of put warrants, net of issuance costs 714,600
Proceeds from issuance of common stock 7,400 2,272,198 23,024
Distribution to shareholders (5,186,411) (2,269,377)
Proceeds from long-term debt 67,400,000 35,100,000 2,700,000
Repayment of notes payable, long-term debt and capital leases (33,712,492) (4,930,602) (2,726,389)
Proceeds from repayment of shareholder note 22,230 25,205
Distribution relating to reorganization (45,577,611)
Payment of financing costs (1,639,127) (1,304,000)
Dividends on mandatorily redeemable preferred stock (1,904,480)
------------ ------------ -----------
Net cash provided by (used in) financing activities 30,101,301 (7,889,196) (2,247,537)
------------ ------------ -----------
Net increase (decrease) in cash 441,439 (3,001,818) 2,121,303
Cash and cash equivalents, beginning of period 125,311 3,127,129 1,005,826
------------ ------------ -----------
Cash and cash equivalents, end of year $ 566,750 $ 125,311 $3,127,129
============ ============ ===========
Supplemental cash flows information
Cash payments for:
Interest $ 3,619,625 $ 1,455,740 $ 284,369
Taxes $ 6,096,000 $ 1,066,640 $ 800
Supplemental disclosure of noncash transactions:
Shares of common stock issued in exchange for note $ 202,124 $ 14,820
Accretion of mandatorily redeemable preferred stock $ 1,812,912 $ 536,000
Accretion of put warrants $ 987,406
Adjustment to common stock purchase price $ $ 419,637
Issuance of shares for the acquisition of Cuplex $ 763,149
Issuance of mandatorily redeemable Series B preferred stock
for the acquisition of Cuplex $ 1,057,953
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
10
<PAGE>
DYNAMIC CIRCUITS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----
1. Organization and Summary of Significant Accounting Policies:
-----------------------------------------------------------
Dynamic Circuits Inc. (DCI) manufactures double-sided and multi-layer
printed circuit boards to customer specifications and drawings. The
Company's fiscal year-end is December 31.
Recapitalization:
In August 1996 DCI formed a subsidiary, Dynamic Circuits Inc. a
Delaware Corporation (the "Company"). On August 19, 1996, DCI effected
a reincorporation merger (the "merger"), with the Company, with the
Company surviving the merger. Contemporaneous with the merger, the
Company redeemed 170,911 shares of common stock and 4,557 options to
purchase common stock at a total cost of $45,997,248. Additionally
8,553 shares of common stock were issued to an un-related party for a
purchase price of $2,222,743. In connection with the transaction the
Company issued 120,000 shares of mandatorily redeemable preferred
stock, and warrants to purchase 15,392 shares of common stock for
$12,000,000, of which $10,076,000 was allocated to mandatorily
redeemable preferred stock and $1,924,000 was allocated to warrants. In
addition, the Company borrowed $35,100,000 under a term loan.
The transaction was accounted for as a recapitalization, and
accordingly, no change in the accounting basis of DCI's assets was made
in the accompanying financial statements. The amount paid to the
stockholders of DCI of $45,997,248 exceeded DCI's net assets of
approximately $9,119,637 on the date of the transaction by $36,877,611.
This amount was recorded as a distribution in excess of net book value.
Principles of Consolidation:
The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned operating subsidiary Cuplex, Inc.
(Cuplex or subsidiary). All significant intercompany balances and
transactions have been eliminated in consolidation.
Revenue Recognition:
The Company recognizes revenue upon product shipment.
Continued
11
<PAGE>
DYNAMIC CIRCUITS INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----
1. Organization and Summary of Significant Accounting Policies, continued:
-----------------------------------------------------------
Use of Estimates:
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles which contemplate the
continued existence of the Company. The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amount of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates.
Inventories:
Inventories are stated at the lower of cost (determined on a first-in,
first-out basis) or market value.
Property and Equipment:
Property and equipment are stated at cost, less accumulated
depreciation. Depreciation and amortization is calculated using the
declining balance method over the assets useful life.
When property and equipment are retired or otherwise disposed of, the
related cost and accumulated depreciation or amortization are removed
and a gain or loss is recognized in operations. Maintenance, repairs
and minor expenditures are expensed as incurred.
Intangible Assets:
Goodwill recorded in connection with the acquisition of Cuplex is
amortized on a straight-line basis over 25 years. Debt financing costs
are amortized using the sum of the digits method over the term of the
related loans. Goodwill amortization amounted to $78,897 for the year
ended December 31, 1997. The Company periodically evaluates the
recoverability of goodwill based upon estimated discounted cash flows
from the acquired business.
Continued
12
<PAGE>
DYNAMIC CIRCUITS INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----
1. Organization and Summary of Significant Accounting Policies, continued:
-----------------------------------------------------------
Income Taxes:
The Company is organized as a Delaware corporation. Subsequent to the
merger, the Company accounts for taxes using the liability method.
Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax bases
of assets and liabilities using current tax laws and rates. Valuation
allowances are established when necessary to reduce deferred tax assets
to the amounts expected to be realized. Prior to the merger, the
Company was organized as a California Subchapter S corporation and as
such was not a tax paying entity for federal income tax purposes, but
was required to pay the state of California a reduced rate based on
taxable income.
Concentration of Credit Risk:
The Company sells printed circuit boards to customers in a wide variety
of industries. The Company's customers are geographically dispersed
throughout the United States. As of December 31, 1997, the Company's
cash and cash equivalents were maintained with two financial
institutions.
Financial Instruments:
The Company considers all highly liquid investments with an original or
remaining maturity of three months or less at the date of purchase to
be cash equivalents.
Amounts reported for cash and cash equivalents, accounts receivable,
accounts payable and other accrued liabilities are considered to
approximate fair value primarily due to their short maturities. Based
on borrowing rates currently available to the Company for loans with
similar terms, the carrying value of its long term debt, and
mandatorily redeemable preferred stock approximate fair value.
Current Liabilities:
Under the Company's cash management program, which includes a
controlled disbursement account, checks issued but not presented to
banks may result in overdraft balances for accounting purposes and are
classified as "Book overdrafts" in the Balance Sheet.
Continued
13
<PAGE>
DYNAMIC CIRCUITS INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----
1. Organization and Summary of Significant Accounting Policies, continued:
-----------------------------------------------------------
Recent Accounting Pronouncements:
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130 (SFAS 130), "Reporting
Comprehensive Income". This statement establishes requirements for
disclosure of comprehensive income and becomes effective for the
Company for fiscal years beginning after December 15, 1997, with
reclassification of earlier financial statements for comparative
purposes. Comprehensive income generally represents all changes in
shareholders' equity except those resulting from investments or
contributions by shareholders. The Company is evaluating alternative
formats for presenting this information, but does not expect this
pronouncement to materially impact the Company's results of operations.
In June 1997, The Financial Standards Board issued Statement of
Financial Accounting Standards No. 131 (SFAS 131), "Disclosures about
Segments of an Enterprise and Related Information". This statement
establishes standards for disclosure about operating segments in annual
financial statements and selected information in interim financial
reports. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. This
statement supersedes Statement of Financial Accounting Standards No.
14, "Financial Reporting for Segments of a Business Enterprise." The
new standard becomes effective for fiscal years beginning after
December 15, 1997, and requires that comparative information from
earlier years be restated to conform to the requirements of this
standard. The Company is evaluating the requirements of SFAS 131 and
the effects, if any, on the Company's current reporting and
disclosures.
2. Acquisition:
-----------
On October 9, 1997, the Company completed the acquisition of Cuplex Inc.,
a Delaware corporation, for a purchase price of $12,470,000. Cuplex,
located in Garland, Texas, with facilities in Dallas and Garland, TX, and
in Marlboro MA, fabricates advanced high-density multilayer boards and
assembles high density backpanel and electromechanical systems. The
transaction has been accounted for as a purchase and therefore the results
of Cuplex's operations for the period subsequent to the acquisition date
to December 31, 1997 have been included in the Company's results of
operations for the year ended December 31, 1997.
Continued
14
<PAGE>
DYNAMIC CIRCUITS INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----
2. Acquisition, continued:
-----------
Consideration for the acquisition was allocated as follows:
<TABLE>
<S> <C>
Cash consideration paid $ 12,470,000
Repayment of debt on acquisition 15,498,118
Acquisition costs 934,376
Issuance of common stock 763,149
Issuance of Series B mandatorily redeemable Preferred Stock 1,057,953
Fair value of assets acquired (6,551,531)
Debt assumed on acquisition (15,498,118)
----------------
Goodwill $ 8,673,947
================
<CAPTION>
Pro forma information (unaudited)
If the acquisition had occurred on January 1, 1997, the results of
operation of the Company would have been as follows:
<S> <C>
Revenue $ 145,498,000
================
Income before taxes and extraordinary item $ 12,229,000
================
Net income $ 6,613,000
================
3. Inventories:
-----------
Inventories consist of the following:
<CAPTION>
December 31,
-------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
Raw materials $ 6,077,870 $ 735,737
Work in progress 2,291,565 498,502
Finished goods 794,550
----------------- -----------------
$ 9,163,985 $ 1,234,239
================= =================
</TABLE>
Continued
15
<PAGE>
DYNAMIC CIRCUITS INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----
4. Property and Equipment:
----------------------
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1997 1996
-------------- -------------
<S> <C> <C>
Machinery and equipment $ 30,944,815 $ 8,714,105
Land 2,234,759 -
Building 3,379,047 -
Computer hardware and software 2,079,499 647,449
Leasehold improvements 2,125,556 1,132,730
Furniture and fixtures 765,075 127,301
Transportation equipment 142,240 46,268
Waste treatment equipment 941,509 150,910
-------------- -------------
42,612,500 10,818,763
Less accumulated depreciation and
amortization (22,498,760) (5,788,806)
-------------- -------------
$ 20,113,740 $ 5,029,957
============== =============
</TABLE>
Depreciation expense amounted to $3,510,940, $2,128,500 and $1,578,228 for
the years ended December 31, 1997, 1996 and 1995, respectively.
5. Extraordinary items:
-------------------
Early Extinguishment of Debt:
In October 1997, in connection with the acquisition of Cuplex, the
Company entered into a new credit agreement to retire its outstanding
term and revolving credit loans (total of $33,125,000 at December 31,
1996). The transaction constituted an early retirement of debt, and
accordingly the write-off of unamortized debt financing costs was
accounted for as an extraordinary charge.
In October 1995, the Company paid $1,800,000 being full settlement for
a note with an outstanding balance of $2,106,274. The Company
recognized the gain on extinguishment of debt as an extraordinary gain
of $306,274.
Continued
16
<PAGE>
DYNAMIC CIRCUITS INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----
6. Credit Agreement
----------------
Long Term Debt:
The Company, in connection with the acquisition of Cuplex, entered into
a Credit Agreement which provided for an A term loan facility of
$30,000,000, a B term loan facility of $35,000,000, a revolving loan
facility of up to $30,000,000. The Credit Agreement is collateralized
by all assets of the Company and all outstanding stock of its
Subsidiary. The Credit Agreement also has various restrictive covenants
which limit the Company's ability to incur debt or grant a security
interest in its assets, dispose of assets, merge, or consolidate with
another entity, make capital expenditures, enter into operating leases,
or issue or dispose of the Company's capital stock. The Company is
required to meet certain minimum consolidated EBITDA (earnings before
interest, income taxes, depreciation and amortization expense as
defined in the agreement) and financial ratio requirements.
Borrowings under the Credit Agreement as of December 31, 1997 are
summarized as follows:
A Term Loan $ 29,500,000
B Term Loan 35,000,000
Revolving Loan 2,400,000
------------
66,900,000
Less current portion (2,850,000)
------------
$ 64,050,000
============
A Term Loan:
The A term loan bears interest at the Base Rate or Eurodollar Rate, as
defined in the agreement, plus 1.25% or 2.25%, respectively, per annum
(8.1875% at December 31, 1997). The loan is due on September 30, 2002
and is payable in quarterly installments for principal beginning
December 31, 1997. Interest is due monthly. Quarterly installments are
$500,000 for quarters one through four, $1,000,000 for quarter five
through eight, $1,500,000 for quarters nine through twelve, $2,000,000
for quarters thirteen through sixteen and $2,500,000 for quarters
seventeen through twenty. In addition, subject to certain conditions,
the Credit Agreement permits optional prepayments without premium or
penalty.
Continued
17
<PAGE>
DYNAMIC CIRCUITS INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----
6. Credit Agreement, continued
----------------
B Term Loan:
The B term loan bears interest at the Base Rate or Eurodollar Rate, as
defined in the agreement, plus 1.50% or 2.25%, respectively, per annum
(8.4375% at December 31, 1997). The loan is due on September 30, 2002
and is payable in quarterly installments for principal beginning March
31, 1998. Interest is due monthly. Quarterly installments are $87,500
for quarters one through twenty, $11,083,333 for quarters twenty-one
and twenty-two and $11,083,334 for quarter twenty-three. In addition,
subject to certain conditions, the Credit Agreement permits optional
prepayments without premium or penalty.
Revolving Loan:
The revolving loan facility permits borrowings up to $30,000,000 at the
Base Rate or Eurodollar Rate, as defined in the agreement, plus 1.25%
or 2.25%, respectively, per annum (9.75% at December 31, 1997). The
collateral arrangements are the same as the A and B term loans and it
matures on September 30, 2002. Interest on borrowings under the
revolving loan facility is payable quarterly with mandatory principal
payments to the extent that Borrowings, as defined in the agreement,
exceed the Total Revolving Loan Commitment, as defined in the
agreement. As of December 31, 1997, $2,400,000 was outstanding under
the revolving loan facility.
Future minimum principal payments under the credit agreement are
summarized as follows:
Year ending December 31,
------------------------
1998 $ 2,850,000
1999 4,850,000
2000 6,850,000
2001 8,850,000
2002 7,850,000
Thereafter 35,650,000
-------------
$ 66,900,000
=============
Under the Credit Agreement, the Company has committed to pay annual
fees of $75,000 and facility fees of $593,500 on January 1, 1998 and
April 1, 1998, provided that the debt has not been refinanced.
Continued
18
<PAGE>
DYNAMIC CIRCUITS INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----
7. Shareholders Equity:
-------------------
Preferred Stock Series A:
In connection with the merger the Company issued shares of Series A
preferred stock on August 19, 1996. Each share is entitled to a $12 per
annum dividend, which is payable quarterly, in arrears and is
cumulative in nature. Unpaid dividends accrue at 12% per annum until
September 1, 1999 after which a penalty accrual rate applies. Unpaid
dividends rank in preference over those of common shares. The shares of
preferred stock have a liquidation preference of $100 per share plus
accrued but unpaid dividends.
The Company may redeem shares of preferred stock at any time after
appropriate notice and must redeem all shares of preferred stock by
December 31, 2003. In both cases the redemption value is the
liquidation preference plus any accrued and unpaid dividends.
The holders of Series A preferred stock do not have voting rights
except in the event of Series A preferred stock not being redeemed by
December 31, 2003. In addition, the consent of the holders of at least
51% of Series A preferred stock is required for certain changes to the
Company's capital structure or raising of additional debt finance.
Preferred Stock Series B:
In connection with acquisition of Cuplex, the Company issued shares of
Series B preferred stock. Each share is entitled to a $0.90 per annum
dividend, which is payable quarterly, in arrears if and when declared
by the Board of Directors. Unpaid dividends rank in preference over
those of common shares. The shares of preferred stock have a
liquidation preference of $10 per share plus accrued and unpaid
dividends.
The Company may redeem shares of preferred stock at any time after
appropriate notice and must redeem all shares of preferred stock by
October 9, 2000. In both cases the redemption value is the liquidation
preference plus accrued and unpaid dividends.
The holders of Series B preferred stock do not have any voting rights.
Continued
19
<PAGE>
DYNAMIC CIRCUITS INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----
7. Shareholders Equity, continued
-------------------
Warrants:
The Company granted warrants to holders of Series A preferred stock to
purchase common stock as part of the merger on August 19, 1996. Each
warrant entitles the holder to receive from the Company a fully paid
common share after payment of the warrant exercise price of $0.01. The
warrant holder may at any time after the fifth anniversary of the
warrant put them to the Company at fair market value. The put
terminates if an Initial Public Offering (IPO) occurs prior to the put
date. The Company accretes the carrying value of the put warrants over
five years such that the carrying value on the fifth anniversary will
be equal to the fair market value of the put on that date. Changes in
estimates of the fair market value are accounted for prospectively on
the remaining term of the put. Stock warrant activity is as follows:
<TABLE>
<CAPTION>
Number
of Exercise Aggregate
Shares Price Price
--------- --------- -----------
<S> <C> <C> <C>
Balance, January 1, 1996
Warrants issued 15,392 $0.01 $ 154
--------- --------- -----------
Balance, December 31, 1996 15,392 $0.01 $ 154
--------- --------- -----------
Balance, December 31, 1997 15,392 $0.01 $ 154
========= ========= ===========
</TABLE>
The Company has reserved 15,392 shares of common stock for the exercise
of warrants.
Stock Option Plans:
1996 Stock Option Plan:
In June 1996, the Company adopted the 1996 Stock Option Plan. Under
the plan, options to purchase common stock may be granted to
directors, executive officers and other key employees of the
Company. The Company has reserved 9,805 shares of common stock for
issuance under the Plan, at December 31, 1997. Options generally
expire ten years from the date of grant. Options vest over either a
four or eight year period. Certain option grants are subject to
accelerated vesting based upon the achievement of certain specified
performance goals.
Continued
20
<PAGE>
DYNAMIC CIRCUITS INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----
7. Shareholders Equity, continued:
-------------------
Stock Option Plans, continued:
1996 Stock Option Plan, continued:
Activity under the 1996 plan is as follows:
<TABLE>
<CAPTION>
Number Exercise Aggregate
of Shares Price Price
--------- -------- -----------
<S> <C> <C> <C>
Balance, January 1, 1995 $ -
Options granted 10,622 $5.00 53,110
Options exercised (6,180) $5.00 (30,900)
--------- -------- -----------
Balance, December 31, 1995 4,442 $5.00 22,210
Options granted 13,402 $5.00 67,010
Options exercised (2,962) $5.00 (14,810)
Options redeemed (4,557) $5.00 (22,785)
--------- -------- -----------
Balance, December 31, 1996 10,325 $5.00 51,625
Options exercised (1,480) $5.00 (7,400)
--------- -------- -----------
Balance, December 31, 1997 8,845 $5.00 $ 44,225
========= ======== ===========
</TABLE>
At December 31, 1997, 3,872 options were exercisable.
1997 Stock Option Plan:
In August 1997, the Company adopted the 1997 Stock Option Plan.
Under the plan, options to purchase common stock may be granted to
any executive or other key employee of the Company or of any
Subsidiary. The Company has reserved 2,202 shares of common stock
for issuance under the Plan. The exercise price shall not be less
than 85% of the fair market value, except that the exercise price
shall be 110% of the fair market value of such share in the case of
any participant who owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company
or its subsidiaries. Options vest over five years and expire ten
years from the date of grant.
Continued
21
<PAGE>
DYNAMIC CIRCUITS INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----
7. Shareholders Equity, continued:
-------------------
Stock Option Plans, continued:
1997 Stock Option Plan, continued:
Activity under the 1997 stock option plan was as follows:
<TABLE>
<CAPTION>
Outstanding Options
----------------------------------------------
Weighted
Average
Available Number Aggregate Price
for Grant of Shares Exercise Price Price per Share
---------- --------- -------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Authorized 2,202
Options granted (1,152) 1,152 $425-$500 $ 561,600 $487
---------- --------- -------------- --------- ---------
Balances, December 31, 1997 1,050 1,152 $425-$500 $ 561,600 $487
</TABLE>
At December 31, 1997, 230 options were exercisable.
Holders of 960 options under the 1997 option plan are entitled to
participate in the Company's Cash Bonus Plan. Under the Bonus Plan
employees are allocated bonus units which vest on an annual basis
over five years. The bonus is only payable in the event of exercise
of options to purchase shares of the Company's Common Stock. The
Company is accruing for the cost of the Bonus Plan over the vesting
period.
In October 1997, the Company granted 4,102 options at an exercise
price of $575 under a new stock option plan. At December 31, 1997,
1,230 such options were exercisable.
The Company recognized compensation expense of $239,286,
$1,358,541, and zero in 1997, 1996 and 1995, respectively,
representing the difference between exercise price and the fair
market value of options and restricted stock at the date of grant.
The Company has continued to account for its stock based
compensation in accordance with APB 25 and has adopted the
disclosure-only provisions of Statement of Financial Accounting
Standards No. 123 (SFAS No. 123), "Accounting for Stock-Based
Compensation". Accordingly, no compensation expense has been
recognized under the plans, except for the amounts disclosed in the
above paragraph.
Continued
22
<PAGE>
DYNAMIC CIRCUITS INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----
7. Shareholders Equity, continued:
-------------------
Stock Option Plans, continued:
Had compensation cost been determined based on the fair value at
the date of grant date for awards in 1997, 1996 and 1995 consistent
with the provisions of SFAS No. 123, the Company's net income for
the years ended December 31, 1997, 1996 and 1995 would have been
reduced to the pro forma amounts indicated below (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net income-as reported $ 5,072 $ 5,040 $ 8,077
Net income-pro forma $ 5,038 $ 5,037 $ 8,076
</TABLE>
Such pro forma disclosures may not be representative of future
compensation cost because options vest over several years and
additional grants are made each year.
In accordance with the provisions of SFAS 123, the fair value of
each option is estimated using the following assumptions used for
option grants during the years ended December 31, 1995, 1996 and
1997; dividend yield of 0%, volatility of 0%, risk-free interest
rates of between 5.42% and 6.00% at the date of grant and an
expected term of three to five years.
The weighted-average grant date fair value of options were $71.12,
$0.75 and $0.30 per option for the years ended December 31, 1997,
1996 and 1995, respectively.
The following table summarizes information about stock options
outstanding at December 31,1997.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------- ------------------------
Weighted- Weighted- Weighted
Average Average Average
Exercise Number Contractual Exercise Number Exercise
Price of Shares Life Price of Shares Price
----------- ---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
$5 8,845 8.50 years $5 3,872 $5
$425-$575 5,254 9.68 years $556 1,460 $561
---------- ----------
14,099 8.94 years $210 5,332 $157
========== ==========
</TABLE>
Continued
23
<PAGE>
DYNAMIC CIRCUITS INC.
NOTES TO FINANCIAL STATEMENTS, Continued
-----
8. Commitments and Contingencies:
-----------------------------
The Company leases various facilities under non-cancelable operating
leases expiring through 2006.
Total future minimum lease payments under operating leases are as follows:
Year Ending December 31,
------------------------
1998 $ 1,275,404
1999 1,103,030
2000 1,090,084
2001 1,084,667
2002 and thereafter 1,604,810
------------
$ 6,157,995
============
Rent expense amounted to $648,136, $338,280, and $338,280 for the years
ended December 31, 1997, 1996 and 1995, respectively.
The Company is engaged in certain legal and administrative proceedings
incidental to its normal business activities. While it is not possible to
determine the ultimate outcome of these matters, if any, management
believes that the ultimate outcome of these matters will not have a
material adverse effect on the Company's financial condition, results of
operations, or cash flows.
The Company's operations are regulated under a number of federal, state
and local environmental laws and regulations, which govern, among other
things, the discharge of hazardous materials into the air and water as
well as the handling, storage, and disposal of such materials. Compliance
with these environmental laws is a major consideration for the Company,
and there can be no assurances that environmental laws and regulations
will not become more stringent in the future or that the Company will not
incur significant costs in the future to comply with such laws and
regulations.
Continued
24
<PAGE>
DYNAMIC CIRCUITS INC.
NOTES TO FINANCIAL STATEMENTS, Continued
-----
9. Income Taxes:
------------
The provisions for income taxes included the following:
Year ended December 31,
----------------------------------------------------
1997 1996 1995
------------ ------------ -----------
Federal
Current $ 3,680,401 $ 1,309,994 $ -
Deferred (101,103) (304,406) -
------------ ------------ -----------
3,579,298 1,005,588 -
------------ ------------ -----------
State
Current 631,092 465,868 123,004
Deferred (58,075) (54,879) -
------------ ------------ -----------
573,017 410,989 123,004
------------ ------------ -----------
$ 4,112,315 $ 1,416,577 $ 123,004
============ ============ ===========
The provision for taxes differed from that expected by applying the basic
rate of federal tax due primarily to the change of tax status of the
Company as a result of the recapitalization (see Note 1) and that certain
transaction related charges are not deductible for tax purposes.
The significant components of deferred tax assets consist of the
following:
1997 1996
------------ ----------
Deferred tax assets and liabilities:
Allowance for doubtful accounts $ 269,232 $ 113,488
Receivable from Cumex 381,150
Accruals 474,386 142,023
State tax 41,893 103,774
Deferred compensation 271,705
Depreciation and amortization (331,817)
Inventory reserves 501,117
Capital loss 250,000
Valuation allowance (250,000)
------------ ----------
Total $ 1,607,666 $ 359,285
============ ==========
Continued
25
<PAGE>
DYNAMIC CIRCUITS INC.
NOTES TO FINANCIAL STATEMENTS, Continued
-----
9. Income Taxes, continued:
-------------
The non-current portion of deferred tax assets, which totaled $646,037 at
December 31, 1997 and zero at December 31, 1996, is included in other
assets.
The Company has provided a valuation allowance for its deferred tax assets
relating to capital loss to the extent it does not expect such amounts to
be realized through taxable income from future operations, or by
carrybacks to prior years taxable income.
10. Related Parties:
---------------
Management Fees:
The Company has an agreement dated August 19, 1996 for financial
advisory services with Celerity Partners, L.L.C. (Celerity) and Bain
Capital, Inc. (Bain) who hold a partnership interest in Celerity
Circuits L.L.C., the majority shareholder of the Company. The agreement
provides for annual management fees of $150,000 to be paid to Celerity
and/or Bain for so long as Celerity and/or Bain own, either directly or
through an affiliated entity, an equity interest in the Company. The
management fees are payable in quarterly installments. The agreement
also provides for the reimbursement of certain allowed expenses. In
connection with the Recapitalization in 1996 and with entering into the
Credit Agreement in 1997, the Company paid specific advisory fees to
Celerity and Bain. Management fees and expense reimbursements under the
agreements amounted to approximately $359,272 and $78,033, in December
31, 1997 and 1996, respectively. Specific advisory fees amounted to
approximately $706,092 and $1,182,033, for the years ended December 31,
1997 and 1996, respectively. The Company is required to pay a
management fee of $56,250 per quarter to Celerity and Bain,
respectively, effective January 1, 1998.
Receivable from Related Party:
In connection with the Acquisition, Cuplex's 50% interest in Cumex SA
de CV, a Mexican corporation (Cumex) was sold to certain former
shareholders of Cuplex. On October 9, 1997, Cuplex and Cumex signed an
Operating Agreement by which Cuplex agrees to provide management and
technical services to Cumex. Cumex agrees to provide manufacturing
services to Cuplex for a period of two years and a repayment schedule
was agreed for the amount due by Cumex to Cuplex. The balance
outstanding at October 9, 1997 was $3.2 million. On October 9, 1997,
DCI and the shareholders of Cumex entered into an Option Agreement by
which it was agreed that DCI could purchase 100% of Cumex until
termination of the Operating Agreement.
Continued
26
<PAGE>
DYNAMIC CIRCUITS INC.
NOTES TO FINANCIAL STATEMENTS, Continued
10. Related Parties:
---------------
Receivable from Related Party, continued
On the acquisition of Cuplex the receivable from Cumex was valued at its
net present value determined by applying appropriate discount rates. This
resulted in an adjustment in the fair value of the receivable of $1.1
million. At December 31, 1997, the gross and net amounts receivable from
Cumex are $3.6 million and $2.5 million, respectively. The net amount is
included in the Balance Sheet caption other assets.
11. Non-Recurring Charges:
---------------------
The non-recurring charges incurred in 1996 as a result of the
recapitalization consist of the following:
Compensation expense $ 2,340,593
Professional and legal fees 2,100,759
---------------
$ 4,441,352
===============
12. Employee benefit plans:
----------------------
The Company and its subsidiary have established defined contribution
retirement plans that are intended to qualify under Section 401 of the
Internal Revenue Code ("the Plan"). The Plans cover substantially all
officers and employees of the Company and its subsidiary. Contributions to
the Plans are determined at the discretion of the Board of Directors. No
contributions were made to the Plans for the years ended December 31,
1997, 1996 or 1995.
27
<PAGE>
DYNAMIC CIRCUITS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
----
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1998 1997
-------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 660,795 $ 566,750
Restricted cash 50,000 50,000
Trade accounts receivable, net 21,248,038 21,488,036
Inventory 10,471,157 9,163,985
Prepaid expenses and other current assets 947,845 1,354,762
Deferred taxes 961,629 961,629
-------------- --------------
Total current assets 34,339,464 33,585,162
Property and equipment, net 21,123,429 20,113,740
Other assets 5,199,180 5,402,292
Goodwill, net 9,229,001 8,595,050
-------------- --------------
Total assets $ 69,891,074 $ 67,696,244
============== ==============
LIABILITIES PUT WARRANTS MANDATORILY REDEEMABLE
PREFERRED STOCK AND SHAREHOLDERS' DEFICIT
Current liabilities:
Book overdraft $ 3,224,677
Accounts payable $ 8,914,115 8,595,700
Accrued liabilities 6,344,244 5,825,385
Long-term debt, current portion 3,874,000 2,850,000
-------------- --------------
Total current liabilities 19,132,359 20,495,762
Long-term debt, net of current portion 62,087,000 64,050,000
-------------- --------------
Total liabilities 81,219,359 84,545,762
-------------- --------------
Minority interest 35,056
Put warrants 4,337,771 2,626,406
Mandatorily redeemable preferred stock
Series A: 10,661,466 10,506,006
Series B: 1,101,823 1,072,379
-------------- --------------
16,136,116 14,204,791
-------------- --------------
Common stock 5,535 5,385
Additional paid-in capital 7,827,023 6,537,181
Note receivable from shareholder (202,124) (202,124)
Deferred compensation (542,396) (656,888)
Distribution in excess of net book value (36,877,611) (36,877,611)
Retained earnings 2,325,172 139,748
-------------- --------------
Total shareholders' deficit (27,464,401) (31,054,309)
-------------- --------------
Total liabilities, put warrants,
mandatorily redeemable preferred
stock and shareholders' deficit $ 69,891,074 $ 67,696,244
============== ==============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
28
<PAGE>
DYNAMIC CIRCUITS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
----
<TABLE>
<CAPTION>
Three Months Ended June 30,
--------------------------------------
1998 1997
----------------- -----------------
<S> <C> <C>
Sales $ 37,396,240 $ 17,067,522
Cost of sales 26,751,291 9,432,762
----------------- -----------------
Gross profit 10,644,949 7,634,760
----------------- -----------------
Operating expenses:
Sales and marketing 2,348,973 1,136,715
General and administrative 3,258,735 2,644,941
----------------- -----------------
5,607,708 3,781,656
----------------- -----------------
Operating income 5,037,241 3,853,104
Other income 112,439 14,069
Interest expense, net 1,563,857 825,025
----------------- -----------------
Income before taxes 3,585,823 3,042,148
Income tax expense 1,782,813 1,280,582
----------------- -----------------
Net income before accretion 1,803,010 1,761,566
Accretion of mandatorily redeemable preferred stock
and put warrants 1,707,423 585,568
----------------- -----------------
Net income available to common
shareholders $ 95,587 $ 1,175,998
================= =================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
29
<PAGE>
DYNAMIC CIRCUITS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
----
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------
1998 1997
----------------- -----------------
<S> <C> <C>
Sales $ 77,220,707 $ 33,027,588
Cost of sales 54,232,387 18,800,664
----------------- -----------------
Gross profit 22,988,320 14,226,924
----------------- -----------------
Operating expenses:
Sales and marketing 4,704,663 2,346,215
General and administrative 6,270,853 5,108,248
----------------- -----------------
10,975,516 7,454,463
----------------- -----------------
Operating income 12,012,804 6,772,461
Other income 176,045 55,608
Interest expense, net 3,138,375 1,585,356
----------------- -----------------
Income before taxes 9,050,474 5,242,713
Income tax expense 4,280,782 2,206,903
----------------- -----------------
Net income before accretion 4,769,692 3,035,810
Accretion of mandatorily redeemable preferred stock
and put warrants 2,584,269 1,042,723
----------------- -----------------
Net income available to common
shareholders $ 2,185,423 $ 1,993,087
================= =================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
30
<PAGE>
DYNAMIC CIRCUITS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
----
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------
1998 1997
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income before accretion $4,769,692 $ 3,035,810
Adjustments to reconcile net income to net cash
provided in operating activities:
Depreciation 2,527,972 1,222,474
Amortization 614,479 117,639
Allowance for doubtful accounts 142,072 363,096
Deferred compensation expense 114,492 124,794
Gain on sale of fixed assets - (47,123)
Change in assets and liabilities:
Accounts receivable 234,191 (2,682,898)
Inventories (1,307,172) (100,000)
Prepaid expenses and other current assets 865,903 (611,679)
Book overdrafts (3,224,677) 84,051
Accounts payable 293,415 3,647
Accrued liabilities 506,447 175,293
----------- ------------
Net cash provided by operating activities 5,536,814 1,685,104
----------- ------------
Cash flows from investing activities:
Acquisition of property and equipment (3,465,141) (3,782,823)
Disposal of property and equipment 193,544
Change in other assets 675,364 (116,465)
Acquisition of subsidiary, net of cash acquired (660,000) -
----------- ------------
Net cash used in investing activities (3,449,777) (3,705,744)
----------- ------------
Cash flows from financing activities:
Increase in restricted cash - (50,000)
Proceeds from issuance of common stock 857,508 3,700,000
Proceeds from long-term debt 200,000 (1,750,000)
Repayment of notes payable, long-term debt
and capital leases (1,175,000)
Payment of financing costs (1,187,500)
Dividends on mandatorily redeemable preferred stock (688,000)
----------- ------------
Net cash provided by financing activities (1,992,992) 1,900,000
----------- ------------
Increase (decrease) in cash and cash equivalents 94,045 (120,640)
Cash and cash equivalents at beginning of period 566,750 125,311
----------- ------------
Cash and cash equivalents at end of period $ 660,795 $ 4,671
=========== ============
Supplemental disclosure of noncash transactions:
Accretion of mandatorily redeemable preferred stock $ 872,904 $ 882,289
Accretion of put warrants $1,711,365 $ 160,434
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
31
<PAGE>
DYNAMIC CIRCUITS INC.
NOTES TO FINANCIAL STATEMENTS
----
1. Basis of Presentation:
---------------------
The accompanying unaudited condensed consolidated financial statements for
the three and six month periods ended June 30, 1998 include the accounts of
Dynamic Circuits Inc. (DCI), its wholly owned subsidiary Cuplex (acquired
on October 9, 1997) and its 80% owned subsidiary, DCI/Design Plus L.L.C.
(acquired on June 24, 1998) and have been prepared in accordance with
generally accepted accounting principles. All intercompany balances and
transactions have been eliminated. The financial information for the three
and six month periods ended June 30, 1997 represent the financial
information of DCI. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of the Company's financial position, results of operations and
cash flows at the dates and for the periods indicated have been included.
The result of operations for the interim period presented is not
necessarily indicative of the results for the year ending December 31,
1998. Because all of the disclosures required by generally accepted
accounting principles are not included in the accompanying consolidated
financial statements and related notes, they should be read in conjunction
with the audited consolidated financial statements and related notes
included in the Company's financial statements for the fiscal year-ended
December 31, 1997.
2. Common Stock:
------------
In January 1998, the stockholders approved an increase in the Company's
authorized shares of common stock to 9 million concurrently with a one
hundred-for-one stock split. All share, common stock and capital in excess
of par value have been restated to reflect the effect of this split.
Continued
32
<PAGE>
DYNAMIC CIRCUITS INC.
NOTES TO FINANCIAL STATEMENTS
----
3. Inventory:
---------
Inventory are stated at the lower of standard cost (which approximates cost
on a first-in, first-out basis) or market. Inventory details are as
follows:
June 30, December 31,
1998 1997
----------------- -----------------
Raw materials $ 6,442,864 $ 6,077,870
Work in progress 3,700,442 2,291,565
Finished goods 327,851 794,550
----------------- -----------------
Total inventory $ 10,471,157 $ 9,163,985
================= =================
4. Acquisition of Cuplex:
---------------------
As discussed in Note 2 to the 1997 consolidated financial statements on
October 9, 1997, the Company completed the acquisition of
Cuplex, Inc. The results of Cuplex have been included in the Company's
results of operations subsequent to the acquisition. If the acquisition had
occurred January 1, 1997 and April 1, 1997, the pro forma sales and net
income of the Company for the three month and six month periods ended ended
June 30, 1997 would have been approximately $37,000,000, $2,700,000,
$70,500,000 and $4,600,000, respectively.
5. Acquisition of DCI/Design Plus:
------------------------------
On June 24, 1998, the Company acquired 80% of a newly formed company
DCI/Design Plus L.L.C. ("DCI/Design Plus"). Coincident with the
acquisition, Design Plus, a sole proprietorship which was engaged in
printed circuit board design, contributed all of its assets to DCI/Design
Plus for consideration of $660,000 and a 20% interest in DCI/Design Plus.
Goodwill of $533,182 arose on the transaction. The results of DCI/Design
Plus are not material to the results of DCI.
6. Comprehensive Income:
--------------------
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS 130").
SFAS 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of SFAS 130
had no impact on the Company, as there are no components of comprehensive
income.
Continued
33
<PAGE>
DYNAMIC CIRCUITS INC.
NOTES TO FINANCIAL STATEMENTS
----
7. Recent Accounting Pronouncements:
--------------------------------
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 131 "Disclosure About Segments of an
Enterprise and Related Information" ("SFAS 131"). Although the Company
adopted SFAS 131 beginning January 1, 1998, DCI has elected not to report
segment information in interim financial statements in the first year of
application consistent with the provisions of the statement.
8. Subsequent:
----------
On July 23, 1998 Details Holdings Corporation (Holdings) and the Company
executed a stock contribution and merger agreement. In connection with this
agreement, Holdings acquired all of the outstanding capital stock of the
Company for aggregate merger consideration of approximately $247 million.
34
<PAGE>
(b) The required pro forma financial information with respect to the
acquired business referred to in Item 2 of this Report are included
herewith.
Unaudited Pro Forma Financial Data
The following Unaudited Summary Pro Forma Consolidated Balance Sheet of
Details Capital as of June 30, 1998 gives effect to the DCI Transaction as if it
had occurred on such date.
The following Unaudited Pro Forma Consolidated Statements of Operations of
Details Capital for the year ended December 31, 1997 and the six months ended
June 30, 1998 give effect to the Recapitalization, the NTI Acquisition, the
Cuplex Acquisition, and the DCI Transaction as if they had occurred on January
1, 1997. The Unaudited Pro Forma Consolidated Statement of Operations do not
purport to represent what Details Capital's results of operations would have
been if the Recapitalization, the NTI Acquisition, the Cuplex Acquisition, and
the DCI Transaction, had occurred as of the dates indicated or what such results
will be for future periods. The unaudited pro forma financial data are based on
the historical consolidated financial statements of the Company and the
assumptions and adjustments described in the accompanying notes.
The unaudited summary pro forma balance sheet of Details Capital also
includes the following non-recurring charges related to the DCI Transaction: (i)
approximately $6.8 million for compensation to DCI stock option holders; (ii)
approximately $3.2 million in compensation to DCI non-contract employees; (iii)
approximately $6.8 million from the write off of deferred financing fees; and
(iv) approximately $0.7 million incurred in the termination of the DCI
management fee. Such charges aggregated $17.5 million and resulted in a net
charge to earnings of $10.5 million (net of tax benefit of $7.0 million,
assuming an estimated 41% tax rate).
35
<PAGE>
DETAILS CAPITAL
UNAUDITED SUMMARY PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
Details
Details DCI Capital
Capital DCI Transactions Combined
June 30, 1998 June 30, 1998 Adjustments Pro Forma
------------------ --------------- -------------- --------------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,437 $ 711 $ (2,589) (g) $ 559
Trade receivables, net 17,063 21,248 - 38,311
Inventories 7,226 10,471 1,000 (d) 18,697
Prepaid expenses and other 1,074 948 - 2,022
Income tax refunds 1,582 - - 1,582
Deferred tax asset 8,019 962 4,363 (a) 15,884
2,540 (h)
------------------ --------------- -------------- --------------
Total current assets 37,401 34,340 5,314 77,055
Property and equipment, net 30,848 21,123 10,000 (d) 61,971
Debt issue costs 13,003 2,248 7,382 (g) 16,437
(6,196) (h)
Goodwill 24,863 9,229 (9,229) (d) 156,036
131,173 (d)
Intangible and other assets 679 2,951 109,000 (d) 117,171
4,541 (i)
Deferred tax asset - - - -
------------------ --------------- -------------- --------------
$ 106,794 $ 69,891 $ 251,985 $ 428,670
================== =============== ============== ==============
Liabilities and Stockholders' Deficit
Curent liabilities:
Current maturities of long-term debt and
capital lease obligations $ 4,902 $ 3,874 $ 12,316 (c) $ 1,569
89,439 (d)
2,289 (d)
665 (a)
(32,630) (f)
(79,286) (g)
Deferred payments - - 1,680 (i) 2,415
735 (a)
Accounts payable 5,710 8,914 - 14,624
Escrow payable to redeemed stockholders 4,500 - - 4,500
Accrued expenses 7,954 6,345 365 (d) 14,664
------------------ --------------- -------------- --------------
Total current liabilities 23,066 19,133 (4,427) 37,772
Long-term debt 266,780 62,075 6,827 (a) 419,761
(170,921) (g)
255,000 (g)
Deferred tax liability 445 - 49,200 (d) 49,645
Long-term portion of deferred payments - - 2,861 (i) 5,324
2,463 (a)
Capital lease obligations 7,143 12 - 7,155
------------------ --------------- -------------- --------------
Total liabilities 297,434 81,220 141,003 519,657
------------------ --------------- -------------- --------------
Mandatorily redeemable preferred stock - 11,798 (11,798) (c) -
------------------ --------------- -------------- --------------
Minority interest in preferred stock of subsidiary - - 1,102 (c) 1,102
------------------ --------------- -------------- --------------
Put warrants - 4,338 (4,338) (b) -
------------------ --------------- -------------- --------------
Stockholders' Deficit:
Common stock and additional paid-in-capital 88,630 7,833 15 (b) 190,837
(16) (e)
(7,832) (e)
69,577 (d)
32,630 (f)
Note receivable from shareholder - (202) 202 (d) -
Deferred compensation - (543) 543 (e)
Distribution in excess of net book value - (36,878) 36,878 (e) -
(Accumulated deficit)/retained earnings (279,270) 2,325 (4,048) (a) (282,926)
(1,887) (a)
4,323 (b)
(1,304) (c)
(392) (a)
983 (e)
(3,656) (i)
------------------ --------------- -------------- --------------
Total stockholders' deficit (190,640) (27,465) 126,016 (92,089)
------------------ --------------- -------------- --------------
$ 106,794 $ 69,891 $ 251,985 $ 428,670
================== =============== ============== ==============
</TABLE>
See Notes to Unaudited Summary Pro Forma Consolidated Balance Sheet.
36
<PAGE>
DETAILS CAPITAL
NOTES TO UNAUDITED SUMMARY PRO FORMA CONSOLIDATED BALANCE SHEET
June 30, 1998
(dollars in thousands)
(a) Represents the balance sheet impact to DCI of the non-recurring charges of
$4,048 and $1,887 to compensate the holders of options to purchase DCI
common stock immediately prior to the DCI Transaction through the payment
of $6,827 in cash funded through additional indebtedness under the DCI
revolving credit facility and the issuance of $3,198 of short term notes
payable. In addition, reflects the non-recurring charge of $392 for the
$665 payment in connection with the termination of the DCI management fee
agreement. These charges to equity are net of a tax benefit of $4,363
assuming an estimated 41% effective tax rate.
(b) Reflects the exercise of the outstanding warrants to purchase 1,539,200
shares of DCI common stock at $0.01 per share immediately prior to the DCI
Transaction. Prior to the exercise, DCI had been accreting these warrants
to the market value of the put through the date on which the holders could
put back the underlying stock to DCI through a direct reduction of retained
earnings. In connection with the exercise of the warrants, the carrying
value of the put warrants has been reflected as an increase to DCI's
retained earnings.
(c) Reflects: (i) the merger consideration paid for and retirement of a portion
of the DCI mandatorily redeemable preferred stock at its liquidation
preference of $12,316 in exchange for a shareholder note payable; and (ii)
the reclassification of the remaining portion of the DCI mandatorily
redeemable preferred stock to reflect its status as a minority interest in
DCI post-acquisition. The merger consideration to the preferred stock
holders has been reflected as part of the purchase price of the DCI
Transaction (see Note (d)). The difference between the carrying value of
the preferred stock, which was redeemed and retired, of $10,696 and the
merger consideration has been reflected as a decrease in DCI's retained
earnings immediately prior to the DCI Transaction. The merger
consideration will be paid with a portion of the proceeds of the New Senior
Credit Facility (see Note (f)). The remaining preferred stock of DCI of
$1,102 will remain outstanding as a minority interest in DCI subsequent to
the DCI Transaction.
(d) Under purchase accounting, the total purchase price will be allocated to
the acquired assets and liabilities of DCI based on their relative fair
values as of the closing date of the DCI Transaction, which will be
determined within one year after such date. Accordingly, the final
allocations could be different from the amounts reflected herein, and such
differences may be significant. The purchase price of $246,964 represents:
(i) the merger consideration payable to the common stock shareholders for a
portion of their shares in DCI, (ii) the merger consideration payable to
certain of the preferred stock shareholders of DCI for their preferred
stock in DCI (see Note (c) above), (iii) amounts payable to holders of
restricted stock, (iv) DCI Long term debt assumed in the transaction, (v)
the estimated value of the shares and options to purchase shares of Details
Holdings exchanged for the remaining shares of DCI and options to purchase
DCI, and (vi) estimated fees and expenses. The amount and components of the
estimated purchase price along with the allocation of the estimated
purchase price to assets purchased and liabilities assumed as though the
DCI Transaction had occurred on June 30, 1998 are as follows:
37
<PAGE>
<TABLE>
<CAPTION>
Purchase Price:
<S> <C>
Merger consideration in exchange for common stock of DCI (1).................. $ 89,439
Merger consideration in exchange for preferred stock of DCI (1)............... 12,316
Amounts payable to holders of restricted stock of DCI (2)..................... 567
Assumption of DCI long-term debt(1)........................................... 72,776
Estimated value of Details equity issued...................................... 69,577
Estimated fees and expenses (3)............................................... 2,289
--------
$246,964
========
Allocation of Purchase Price:
DCI total assets at June 30, 1998............................................. $ 69,891
Estimated write-up of inventories............................................. 1,000
Estimated write-up of fixed assets............................................ 10,000
Estimated value of identifiable intangibles................................... 109,000
Note receivable from stockholder(2)........................................... 202
Deferred tax asset related to DCI option redemption (4)....................... 4,363
Elimination of Cuplex goodwill at June 30, 1998............................... (9,229)
Assumption of DCI liabilities (excluding DCI long-term debt) at June 30, 1998. (8,444)
DCI obligations with respect to DCI option holders (5)........................ (10,690)
Estimated deferred tax liability (6).......................................... (49,200)
Minority interest in preferred stock of the subsidiary........................ (1,102)
Estimated goodwill from the DCI Transaction................................... 131,173
--------
$246,964
========
</TABLE>
(1) Amounts will be funded through a short-term note payable, which will be
repaid with the proceeds of the issuance of the Discount Notes and the
borrowings under the New Senior Credit Facility (see Note (f)).
(2) Includes $202 of amounts due to DCI under a note receivable from
stockholder which will be used to offset cash payment to the stockholder.
(3) Amounts have been reflected as additional short-term borrowings of
Details. These borrowings will be repaid as set forth in (1) above.
(4) Represents the additional deferred tax asset from the compensation to DCI
option holders immediately prior to the DCI Transaction which was not
reflected on the DCI balance sheet as of June 30, 1998 (see Note (a)).
(5) Represents additional liabilities incurred in connection with the
compensation paid to DCI employee option holders immediately prior to the
DCI Transaction which will be assumed by Details Capital and $665 paid in
connection with the termination of the DCI management fee agreement (see
Note (a)).
(6) In accordance with generally accepted accounting principles, an estimated
deferred tax liability will be recorded for the estimated write-up of
tangible assets and amounts allocated to identifiable intangibles at an
effective tax rate of approximately 41%.
(e) Reflects the elimination of the DCI's historical stockholders' equity
balances in connection with purchase accounting.
(f) Represents the contribution of capital to Details, Inc. from Details
Intermediate resulting from the proceeds of the issuance of the Discount
Notes of $35,000, net of the related fees and expenses of that issuance of
approximately $2,370. This contribution of capital was used as partial
consideration for the refinancings discussed in Note (g) below.
38
<PAGE>
(g) Reflects the incurrence of debt relating to the New Senior Credit
Facilities and the New Discount Notes and the uses of cash for purposes of
the effecting the refinancing of the DCI Facility and the Details Senior
Credit Facilities and the repayment of other short-term notes payable as
follows:
Sources of Cash:
Existing Cash........................................... $ 2,589
Contribution of capital from Details
Intermediate (see Note (f)).......................... 32,630
New Senior Credit Facilities............................ 255,000
--------
$290,219
========
Uses of Cash:
Payment of Details Senior Credit Facilities (1)(3)...... 107,641
Payment of DCI Facility (2)(3).......................... 72,776
Merger consideration in exchange for DCI
preferred stock (3).................................. 12,316
Merger consideration in exchange for DCI
common stock (3)..................................... 89,439
DCI management fee agreement termination charges........ 665
Estimated fees and expense.............................. 7,382
--------
$290,219
========
(1) Includes $2,289 incurred in connection with the payment of fees and
expenses associated with the DCI Transaction (see Note (d)).
(2) Includes $6,827 incurred in connection with the payments to DCI option
holders (see Note (a)).
(3) Allocated between current and long-term as follows:
Current:
Details Senior Credit Facility....................... $ 5,622
DCI Facility......................................... 3,874
Merger consideration paid to preferred stockholders.. 12,316
Merger consideration paid to option holders and
common stockholders......................... 89,439
Payment for termination of DCI management fee........ 665
Less: net Discount Note proceeds..................... (32,630)
--------
$ 79,286
========
Long-term:
Details Senior Credit Facility....................... $102,019
DCI Facility......................................... 68,902
--------
$170,921
========
(h) Reflects the write-off of $3,948 and $2,248 in unamortized deferred
financing fees related to the Details Senior Credit Facilities and the DCI
Facility, respectively, in connection with the refinancing discussed in
Note (f). The charge to equity for the write-off of deferred financing
fees of $3,656 is net of a tax benefit of $2,540 assuming an estimated 41%
effective tax rate.
(i) Reflects the asset and future liabilities related to the Company's non-
compete agreements entered into with certain senior executives of DCI.
Under the terms of the agreements, future payments are tied to compliance
with the provisions of the non-compete arrangements stipulated in each
individual's contract.
39
<PAGE>
Details Capital
Unaudited Pro Forma Consolidated Statement of Income
Year Ended December 31, 1997
(dollars in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DETAILS CAPITAL
----------------------------------------------------------------------------------
Colorado Springs
Circuits, Inc.
Details d/b/a NTI
Capital Statement of
Historical Operations for Adjustments
Year Ended the Period from -------------------------------- Details
December 31, January 1, 1997 to NTI Capital
1997 December 21, 1997 Recapitalization Acquisition Combine
--------------- ------------------ ------------------ --------------- ----------
<S> <C> <C> <C> <C> <C>
Net sales ........................................ $ 78,756 $ 30,026 $ -- $ -- $ 108,782
Cost of goods sold ............................... 38,675 25,185 -- -- 63,860
--------------- ------------------ ------------------ --------------- ----------
Gross profit ............................... 40,081 4,841 -- -- 44,922
Operating expenses
Compensation to majority shareholder and/or CEO 2,149 -- (2,149)(a) -- --
General and administration ..................... 2,057 1,269 -- -- 3,326
Sales and marketing ............................ 7,278 1,556 -- -- 8,834
Amortization of intangibles .................... -- -- -- 1,008 (e) 1,008
Stock compensation and related bonuses ......... 31,271 3,663 (31,271)(b) (3,663)(f) --
--------------- ------------------ ------------------ --------------- ----------
Operating income ............................ (2,674) (1,647) 33,420 2,655 31,754
Interest income ............................... 96 -- -- -- 96
Interest expense, excluding bridge loans ...... (13,875) (956) (13,683)(c) (1,200)(g) (29,714)
Interest expense on bridge loans .............. (11,417) -- 11,417 (c) -- --
Income from equity investment in subsidiary ... -- -- -- -- --
Other income .................................. -- 13 -- -- 13
--------------- ------------------ ------------------ --------------- ----------
Income (loss) before income taxes and
extraordinary loss ..................... (27,870) (2,590) 31,154 1,455 2,149
Income tax benefit (expense) ..................... 10,858 1,275 (12,773)(d) (1,010)(d) (1,650)
--------------- ------------------ ------------------ --------------- ----------
Income (loss) before extraordinary loss .......... $ (17,012) $ (1,315) $ 18,381 $ 445 $ 499
=============== ================== ================== ============== ===========
EBITDA (q) ....................................... $ (10) $ 507 $ 33,420 $ 3,663 $ 37,580
Depreciation and amortization, excluding
amortization of deferred financing fees ...... $ 2,568 $ 2,141 $ -- $ 1,008 $ 5,717
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
DYNAMIC CIRCUITS, INC.
------------------------------------------------------------------------------
Cuplex
DCI Statement of
Historical Operations for
Year Ended the Period from Cuplex
December 31, January 1, 1997 to Acquisition DCI
1997 October 9, 1997 Adjustments Combined
--------------- -------------------- ----------------- -----------
<S> <C> <C> <C> <C>
Net sales ........................................ $ 86,098 $ 59,400 $ -- $ 145,498
Cost of goods sold ............................... 54,201 51,818 -- 106,019
--------------- -------------------- ----------------- -----------
Gross profit ............................... 31,897 7,582 -- 39,479
Operating expenses
Compensation to majority shareholder and/or CEO -- -- -- --
General and administration ..................... 13,521 1,747 (402)(h) 13,616
(1,250)(i)
Sales and marketing ............................ 4,431 2,526 -- 6,957
Amortization of intangibles .................... 79 -- 268 (j) 347
Stock compensation and related bonuses ......... 239 -- -- 239
--------------- -------------------- ----------------- -----------
Operating income ............................ 13,627 3,309 1,384 18,320
Interest income ............................... 93 259 -- 352
Interest expense, excluding bridge loans ...... (3,937) (891) (1,694)(k) (6,522)
Interest expense on bridge loans .............. -- -- -- --
Income from equity investment in subsidiary ... -- 180 (180)(l) --
Other income .................................. 34 45 -- 79
--------------- -------------------- ----------------- -----------
Income (loss) before income taxes and
extraordinary loss ..................... 9,817 2,902 (490) 12,229
Income tax benefit (expense) ..................... (4,112) (962) 91 (d) (4,983)
--------------- -------------------- ----------------- -----------
Income (loss) before extraordinary loss .......... $ 5,705 $ 1,940 $ (399) $ 7,246
=============== ==================== ================= ===========
EBITDA (q) ....................................... $ 17,109 $ 5,566 $ 1,357 $ 24,032
Depreciation and amortization, excluding
amortization of deferred financing fees ...... $ 3,116 $ 1,593 $ 333 $ 5,042
<CAPTION>
- ----------------------------------------------------------------------------------------------
Details
Capital
DCI and DCI
Transaction Combined
Adjustments Pro Forma
--------------- -----------
<S> <C> <C>
Net sales ....................................... $ -- $ 254,280
Cost of goods sold .............................. 2,000 (m) 171,879
--------------- -----------
Gross profit .............................. (2,000) 82,401
Operating expenses
Compensation to majority shareholder and/or CEO -- --
General and administration .................... (359)(n) 16,455
(128)(p)
Sales and marketing ........................... -- 15,791
Amortization of intangibles ................... 17,972 (m) 19,327
Stock compensation and related bonuses ........ -- 239
--------------- -----------
Operating income ........................... (19,485) 30,589
Interest income .............................. -- 448
Interest expense, excluding bridge loans ..... (5,559)(o) (41,795)
Interest expense on bridge loans ............. -- --
Income from equity investment in subsidiary .. -- --
Other income ................................. -- 92
--------------- -----------
Income (loss) before income taxes and
extraordinary loss .................... (25,044) (10,666)
Income tax benefit (expense) .................... 8,618 (d) 1,985
--------------- -----------
Income (loss) before extraordinary loss ......... $ (16,426) $ (8,681)
=============== ===========
EBITDA (q) ...................................... $ 513 $ 62,125
Depreciation and amortization, excluding
amortization of deferred financing fees ..... $ 19,998 $ 30,757
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statement of Income.
40
<PAGE>
Details Capital
Unaudited Pro Forma Consolidated Statement of Income
Six Months Ended June 30, 1998
(dollars in thousands)
<TABLE>
<CAPTION>
Details
Capital DCI
Historical Historical Details
Six Months Six Months Details Capital
Ended Ended Capital DCI and DCI
June 30, June 30, DCI Transaction Combined
1998 1998 Combined Adjustments Pro Forma
------------ ------------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Net Sales $ 54,499 $ 77,220 $ 131,719 $ -- $ 131,719
Cost of Goods Sold 32,447 54,232 86,679 1,000 (m) 87,679
------------ ------------- ------------- ------------- ----------
Gross profit 22,052 22,988 45,040 (1,000) 44,040
Operating Expenses:
General and administration 1,675 6,092 7,767 (233)(n) 7,353
(181)(p)
Sales and marketing 4,081 4,704 8,785 8,785
Amortization of intangibles 505 179 684 8,981 (m) 9,665
------------ ------------- ------------- ------------- ----------
Operating Income 15,791 12,013 27,804 (9,567) 18,237
Interest income 155 165 320 -- 320
Interest expense (14,687) (3,138) (17,825) (2,928)(o) (20,753)
Other income 13 11 24 -- 24
------------ ------------- ------------- ------------- ----------
Income before provision for income taxes
and extraordinary loss 1,272 9,051 10,323 (12,495) (2,172)
Income tax benefit (expense) (733) (4,281) (5,014) 4,300 (d) (714)
------------ ------------- ------------- ------------- ----------
Income (loss) before extraordinary loss 539 4,770 5,309 (8,195) (2,886)
EBITDA (q) $ 19,097 $ 15,145 $ 34,242 $ 423 $ 34,665
Depreciation and amortization, excluding
amortization of deferred financing fees 3,138 2,956 6,094 9,990 16,084
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statement of Income.
41
<PAGE>
DETAILS CAPITAL
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31, 1997 and
Six Months Ended June 30, 1998
(dollars in thousands)
(a) Reflects cost savings as a result of the cancellation of the employment
agreement with the Company's CEO as a direct result of the
Recapitalization. The CEO's employment was terminated on October 28, 1997.
(b) Reflects the elimination of the charge recorded for stock options vested
under the Holding's 1996 Stock Option Plan. In conjunction with the
Recapitalization, all remaining options under the 1996 Stock Option Plan
were exchanged for options to purchase Class A Common and Class L Common.
All options to purchase Class A Common and Class L Common under the
Holding's Stock Option Plans qualify for fixed plan accounting treatment.
Under fixed plan accounting, changes in the fair value of the Holding's
common stock relative to the exercise price of the underlying options will
not result in additional charges (or credits) to the Details Capital's
statement of income.
(c) The increase in pro forma interest expense as a result of the
Recapitalization is as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
1997
--------------
<S> <C>
Elimination of Details historical interest expense
and fees related to debt repaid in connection with the
Recapitalization $ (9,233)
--------------
Details Senior Credit Facilities (assuming LIBOR
at 5.84%)
Tranche A-$31.1 million @ LIBOR plus 2.50% (funded
on October 28, 1997) 2,154
Tranche B-$50 million @ LIBOR plus 2.75% (funded
on October 28, 1997) 3,568
Senior Subordinated Notes-$100 million (funded on
November 15, 1997) 8,794
Details Capital Discount Notes-$60.1 million (funded on
November 15, 1997) 6,753
Other bank fees and unused commitment fees on the
Revolving Credit Facility 124
Amortization of deferred financing fees
Tranche A and B 617
Senior Subordinated Notes 566
Discount Notes 340
--------------
Total interest from recapitalization 22,916
--------------
Net increase in pro forma interest from the Recapitalization,
excluding interest on the bridge loans $ 13,683
==============
Elimination of interest expense incurred on bridge loans $ (11,417)
==============
</TABLE>
The bridge loans were obtained in connection with the Recapitalization and
were repaid with a portion of the proceeds from the Senior Subordinated
Notes issued by Details Inc. and Senior Discount Notes issued by Details
42
<PAGE>
Capital. The Details Inc. Senior Credit Facilities are being refinanced in
connection with the DCI Transaction (see Note (o)).
(d) Represents the income tax adjustment required to result in a pro forma
income tax provision based on: (i) the Company's historical tax provision
using historical amounts and; (ii) the direct tax effects of the pro forma
transactions described herein at an estimated 41% effective tax rate as
adjusted to exclude the adjustments to goodwill resulting from the NTI
Acquisition, the Cuplex Acquisition and the DCI Transaction which amounts
are not deductible for income tax purposes.
(e) Represents the adjustment to reflect ongoing goodwill amortization
resulting from the NTI Acquisition. Approximately $25,200 was recorded as
a preliminary estimate of goodwill, and such amount is being amortized over
a twenty five year period. Under purchase accounting, the final purchase
price will be allocated to the acquired assets and assumed liabilities of
NTI based on their relative fair values as of the closing date of the NTI
Acquisition, which will be determined within one year after such date.
Accordingly, the final allocations may result in an increase or decrease in
the amounts allocated to goodwill, therefore the amortization and
depreciation expense may be different from the amounts reflected herein and
such differences may be significant.
(f) Reflects the elimination of bonuses paid to certain senior executives and
other employees of NTI immediately prior to the NTI Acquisition. Bonuses
were funded through capital contributions made by selling shareholders of
NTI, as required by the NTI purchase and sale agreement.
(g) The increase to pro forma interest expense as a result of the Company's
draw down on its acquisition line under the Senior Credit Facilities in
connection with the NTI Acquisition on December 22, 1997 is as follows:
<TABLE>
<CAPTION>
Year Ended
December
31, 1997
-------------
<S> <C>
Elimination of NTI historical interest expense on NTI
indebtedness repaid in connection with the NTI
Acquisition $ (956)
Senior Credit Facility
Acquisition Facility - $25 million @ 5.84% LIBOR plus 2.5% 2,029
Amortization of deferred financing fees 127
-------------
Net increase in interest $ 1,200
=============
</TABLE>
The Acquisition Facility will be repaid in connection with the refinancing
of the Company's Senior Credit Facilities in connection with the DCI
Transaction (See Note (o)).
(h) Reflects elimination of operating lease costs on related party leases for
building space which was purchased in connection with the Cuplex
Acquisition on October 9, 1997. The lease expense savings is net of
additional depreciation expense on the building acquired in connection with
the Cuplex Acquisition.
(i) In connection with the Cuplex Acquisition, DCI paid a signing bonus to the
senior executive responsible for certain of the operations of Cuplex post-
acquisition. This signing bonus represents a non-recurring expense of DCI
incurred as a direct result of the Cuplex Acquisition.
(j) Represents the adjustment to reflect ongoing goodwill amortization
resulting from the Cuplex Acquisition and the Design Plus acquisition.
The acquisitions resulted in goodwill of approximately $9,200 which is
being amortized over a twenty five year period.
43
<PAGE>
(k) Reflects the increase to DCI pro forma interest expense as a result of
borrowings incurred under the DCI Facility and the repayment of prior
indebtedness in connection with the Cuplex Acquisition on October 9, 1997
as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
1997
-------------
<S> <C>
Elimination of Cuplex historical interest expense on
Cuplex indebtedness repaid in connection with the
Cuplex Acquisition. $ (891)
Elimination of DCI historical interest expense on DCI
indebtedness repaid in connection with the Cuplex
Acquisition. (2,491)
DCI Senior Credit Facility:
DCI Senior Credit Facility 4,257
Amortization of deferred financing fees 819
-------------
Net increase in interest $ 1,694
=============
</TABLE>
The DCI Facility will be repaid in connection with the DCI Transaction (see
Note (o)).
(l) Represents the elimination of income from Cuplex's equity investments in
Cumex and Spectramask. Both investments were spun off as a direct result
of the Cuplex Acquisition.
(m) Represents the amortization of the intangible assets and goodwill resulting
from the estimated excess of the purchase price over the net book value of
DCI, less the amortization of Cuplex goodwill, calculated as though the DCI
Transaction occurred on January 1, 1997. In addition, reflected is the
depreciation related to the step-up to fair market value of the fixed
assets of DCI in connection with the DCI Transaction. Intangibles,
goodwill, and the fixed asset step-up are expected to be amortized over
lives ranging from four to thirty years. Under purchase accounting, the
total purchase price will be allocated to the acquired assets and assumed
liabilities of DCI based on their relative fair values as of the closing
date of the DCI Transaction, which will be determined within one year after
such date. Accordingly, the final allocations and resulting increases in
amortization and depreciation expense will be different from the amounts
reflected herein and such differences may be significant.
(n) Represents the elimination of management fees incurred in connection with
DCI's management agreement with Bain Capital which will be terminated in
connection with and as a direct result of the DCI Transaction. The
Company's obligations under the Details management agreement with Bain
Capital will not be changed as a result of the DCI Transaction.
44
<PAGE>
(o) The increase in pro forma interest expense as a result of the DCI
Transaction is as follows:
<TABLE>
<CAPTION>
Year Ended Six Months
December June 30,
31, 1997 1998
----------- -----------
<S> <C> <C>
Elimination of DCI pro forma interest expense and
fees on pro forma DCI indebtedness repaid in
connection with the DCI Transaction $ (6,522) $ (3,138)
Elimination of Details, Inc. pro forma interest expense
and fees on pro forma Details, Inc. indebtedness
repaid in connection with the DCI Transaction (10,216) (5,083)
----------- -----------
(16,738) (8,221)
----------- -----------
New Senior Credit Facilities (assuming LIBOR at 5.65%)
Tranche A-$90 million @ LIBOR plus 2.25% 7,110 3,555
Tranche B-$165 million @ LIBOR plus 2.50% 13,448 6,724
Revolving Credit Facility - $-0- million @ LIBOR
plus 2.25% - -
Unused commitment fee on Revolving Credit
Facility of $45 million @ 0.5% 225 113
Amortization of deferred financing fees
Tranche A 369 185
Tranche B 625 312
Revolving Credit Facility 184 92
Imputed interest on deferred payments(1) 336 168
----------- -----------
Total interest on debt incurred in connection with the
DCI Transaction 22,297 11,149
----------- -----------
Net increase in interest in connection with the DCI
Transaction $ 5,559 $ 2,928
=========== ===========
</TABLE>
(1) See Notes (a) and (i) of Notes to the Unaudited Summary Consolidated
Pro Forma Balance Sheet.
(p) Represents the adjustment to reflect income from Design Plus, of which 80%
was acquired by DCI on June 24, 1998. DCI's pro rata share of the net
income of $128 and $181 has been reflected in the year ended December 31,
1997 and the six months ended June 30, 1998, respectively.
(q) EBITDA is defined herein as income before provision for income taxes,
depreciation, amortization, interest expense and the non-cash expense
recorded for certain DCI stock compensation.
45
<PAGE>
Unaudited Pro Forma Financial Data
The following Unaudited Summary Pro Forma Consolidated Balance Sheet of
Details, Inc. as of June 30, 1998 gives effect to the DCI Transaction as if it
had occurred on such date.
The following Unaudited Pro Forma Consolidated Statements of Operations of
Details, Inc. for the year ended December 31, 1997 and the six months ended
June 30, 1998 give effect to the Recapitalization, the NTI Acquisition, the
Cuplex Acquisition, and the DCI Transaction as if they had occurred on January
1, 1997. The Unaudited Pro Forma Consolidated Statement of Operations do not
purport to represent what Details, Inc.'s results of operations would have been
if the Recapitalization, the NTI Acquisition, the Cuplex Acquisition, and the
DCI Transaction, had occurred as of the dates indicated or what such results
will be for future periods. The unaudited pro forma financial data are based on
the historical consolidated financial statements of the Company and the
assumptions and adjustments described in the accompanying notes.
The unaudited summary pro forma balance sheet of Details, Inc. also
includes the following non-recurring charges related to the DCI Transaction: (i)
approximately $6.8 million for compensation to DCI stock option holders; (ii)
approximately $3.2 million in compensation to DCI non-contract employees; (iii)
approximately $6.8 million from the write off of deferred financing fees; and
(iv) approximately .7 million incurred in the termination of the DCI management
fee. Such charges aggregated $17.5 million and result in a net charge to
earnings of $10.5 million (net of tax benefit of $7.0 million, assuming an
estimated 41% tax rate).
46
<PAGE>
DETAILS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DCI Details
Details, Inc. DCI Transactions Combined
June 30, 1998 June 30, 1998 Adjustments Pro Forma
------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,435 $ 711 $ (2,589) (g) $ 557
Trade receivables, net 17,063 21,248 -- 38,311
Inventories 7,226 10,471 1,000 (d) 18,697
Prepaid expenses and other 1,066 948 -- 2,014
Income tax refunds 1,582 -- -- 1,582
Deferred tax asset 2,879 962 4,363 (a) 10,744
2,540 (h)
--------- --------- --------- ---------
Total current assets 32,251 34,340 5,314 71,905
Property and equipment, net 30,848 21,123 10,000 (d) 61,971
Debt issue costs 9,132 2,248 7,382 (g) 12,566
(6,196) (h)
Goodwill 24,863 9,229 (9,229) (d) 156,036
131,173 (d)
Intangible and other assets 1,205 2,951 109,000 (d) 117,697
4,541 (i)
Deferred tax asset -- -- -- --
--------- --------- --------- ---------
$ 98,299 $ 69,891 $ 251,985 $ 420,175
========= ========= ========= =========
Liabilities and Stockholders' Deficit
Current liabilities:
Current maturities of long-term debt and
capital lease obligations $ 4,902 $ 3,874 $ 12,316 (c) $ 1,569
89,439 (d)
2,289 (d)
665 (a)
(32,630) (f)
(79,286) (g)
Deferred payments -- -- 1,680 (i) 2,415
735 (a)
Accounts payable 5,710 8,914 -- 14,624
Escrow payable to redeemed stockholders 4,500 -- -- 4,500
Accrued expenses 7,681 6,345 365 (d) 14,391
--------- --------- --------- ---------
Total current liabilities 22,793 19,133 (4,427) 37,499
Long-term debt 202,019 62,075 6,827 (a) 355,000
(170,921) (g)
255,000 (g)
Deferred tax liability 445 -- 49,200 (d) 49,645
Long-term portion of deferred payments -- -- 2,861 (i) 5,324
2,463 (a)
Capital lease obligations 7,143 12 -- 7,155
--------- --------- --------- ---------
Total liabilities 232,400 81,220 141,003 454,623
--------- --------- --------- ---------
Mandatorily redeemable preferred stock -- 11,798 (11,798) (c) --
--------- --------- --------- ---------
Minority interest in preferred stock of subsidiary -- -- 1,102 (c) 1,102
--------- --------- --------- ---------
Put warrants -- 4,338 (4,338) (b) --
--------- --------- --------- ---------
Stockholders' Deficit:
Common stock 1 1 15 (b) 1
(16) (e)
Additional paid-in-capital 138,403 7,832 (7,832) (e) 240,610
69,577 (d)
32,630 (f)
Note receivable from shareholder -- (202) 202 (d) --
Deferred compensation -- (543) 543 (e)
Distribution in excess of net book value -- (36,878) 36,878 (e) --
(Accumulated deficit)/retained earnings (272,505) 2,325 (4,048) (a) (276,161)
(1,887) (a)
4,323 (b)
(1,304) (c)
(392) (a)
983 (e)
(3,656) (h)
--------- --------- --------- ---------
Total stockholders' deficit (134,101) (27,465) 126,016 (35,550)
--------- --------- --------- ---------
$ 98,299 $ 69,891 $ 251,985 $ 420,175
========= ========= ========= =========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Balance Sheet.
47
<PAGE>
DETAILS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
June 30, 1998
(dollars in thousands)
(a) Represents the balance sheet impact to DCI of the non-recurring charges of
$4,048 and $1,887 to compensate the holders of options to purchase DCI
common stock immediately prior to the DCI Transaction through the payment
of $6,827 in cash funded through additional indebtedness under the DCI
revolving credit facility and the issuance of $3,198 of short term notes
payable. In addition, reflects the non-recurring charge of $392 for the
$665 payment in connection with the termination of the DCI management fee
agreement. These charges to equity are net of a tax benefit of $4,363
assuming an estimated 41% effective tax rate.
(b) Reflects the exercise of the outstanding warrants to purchase 1,539,200
shares of DCI common stock at $0.01 per share immediately prior to the DCI
Transaction. Prior to the exercise, DCI had been accreting these warrants
to the market value of the put through the date on which the holders could
put back the underlying stock to DCI through a direct reduction of retained
earnings. In connection with the exercise of the warrants, the carrying
value of the put warrants has been reflected as an increase to DCI's
retained earnings.
(c) Reflects: (i) the merger consideration paid for and retirement of a portion
of the DCI mandatorily redeemable preferred stock at its liquidation
preference of $12,316 in exchange for a shareholder note payable; and (ii)
the reclassification of the remaining portion of the DCI mandatorily
redeemable preferred stock to reflect its status as a minority interest in
DCI post-acquisition. The merger consideration to the preferred stock
holders has been reflected as part of the purchase price of the DCI
Transaction (see Note (d)). The difference between the carrying value of
the preferred stock, which was redeemed and retired, of $10,696 and the
merger consideration has been reflected as a decrease in DCI's retained
earnings immediately prior to the DCI Transaction. The shareholder note
payable will be repaid with a portion of the proceeds of the New Senior
Credit Facility (see Note (g)). The remaining preferred stock of DCI of
$1,102 will remain outstanding as a minority interest in DCI subsequent to
the DCI Transaction.
(d) Under purchase accounting, the total purchase price will be allocated to
the acquired assets and liabilities of DCI based on their relative fair
values as of the closing date of the DCI Transaction, which will be
determined within one year after such date. Accordingly, the final
allocations could be different from the amounts reflected herein, and such
differences may be significant. The purchase price of $246,964 represents:
(i) the merger consideration payable to the common stock shareholders for a
portion of their shares in DCI, (ii) the merger consideration payable to
certain of the preferred stock shareholders of DCI for their preferred
stock in DCI (see Note (c) above), (iii) amounts payable to holders of
restricted stock, (iv) DCI long term debt assumed in the transaction, (v)
the estimated value of the shares and options to purchase shares of Details
Holdings exchanged for the remaining shares of DCI and options to purchase
DCI, and (vi) estimated fees and expenses. The amount and components of the
estimated purchase price along with the allocation of the estimated
purchase price to assets purchased and liabilities assumed as though the
DCI Transaction had occurred on June 30, 1998 are as follows:
48
<PAGE>
Purchase Price:
Merger consideration in exchange for
common stock of DCI (1)............. $ 89,439
Merger consideration in exchange for
preferred stock of DCI (1).......... 12,316
Amounts payable to holders of
restricted stock of DCI (2)......... 567
Assumption of DCI long term debt (1).. 72,776
Estimated value of Details equity
issued.............................. 69,577
Estimated fees and expenses (3)....... 2,289
---------
$ 246,964
=========
Allocation of Purchase Price:
DCI total assets at June 30, 1998..... $ 69,891
Estimated write-up of inventories..... 1,000
Estimated write-up of fixed assets.... 10,000
Estimated value of identifiable
intangibles......................... 109,000
Note receivable from
stockholder(2)...................... 202
Deferred tax asset related to DCI
option redemption (4)............... 4,363
Elimination of Cuplex goodwill at
June 30, 1998....................... (9,229)
Assumption of DCI liabilities
(excluding DCI long-term debt) at
June 30, 1998....................... (8,444)
DCI obligations with respect to DCI
option holders (5).................. (10,690)
Estimated deferred tax liability (6).. (49,200)
Minority interest in preferred stock
of the subsidiary................... (1,102)
Estimated goodwill from the DCI
Transaction........................... 131,173
---------
$ 246,964
=========
(1) Amounts will be funded through a short-term note payable which will be
repaid with: (i) the capital contribution to Details, Inc. from
Details Intermediate resulting from the proceeds of the issuance of
the Discount Notes by Details Intermediate (see Note (f)); and (ii)
the borrowings under the New Senior Credit Facility (see Note (g)).
(2) Includes $202 of amounts due to DCI under a note receivable from
shareholder which will be used to offset cash payment to the
shareholder.
(3) Amounts have been reflected as additional short-term borrowings of
Details. These borrowings will be repaid as set forth in (1) above.
(4) Represents the additional deferred tax asset from the compensation to
DCI option holders immediately prior to the DCI Transaction which was
not reflected on the DCI balance sheet as of June 30, 1998 (see Note
(a)).
(5) Represents additional liabilities incurred in connection with the
compensation paid to DCI employee option holders immediately prior to
the DCI Transaction which will be assumed by Details, Inc. and the
$665 paid in connection with the DCI management fee agreement. (see
Note (a)).
(6) In accordance with generally accepted accounting principles, an
estimated deferred tax liability will be recorded for the estimated
write-up of tangible assets and amounts allocated to identifiable
intangibles at an effective tax rate of approximately 41%.
(e) Reflects the elimination of the DCI's historical stockholders' equity
balances in connection with purchase accounting.
(f) Represents the contribution of capital to Details, Inc. from Details
Intermediate resulting from the proceeds of the issuance of the Discount
Notes of $35,000, net of the related fees and expenses of that issuance of
approximately $2,370. This contribution of capital was used as partial
consideration for the refinancings discussed in Note (g) below.
49
<PAGE>
(g) Reflects the incurrence of debt relating to the New Senior Credit
Facilities and the uses of cash for purposes of the effecting the
refinancing of the DCI Facility and the Details Senior Credit Facilities
and the repayment of other short-term notes payable as follows:
Sources of Cash:
Existing cash........................................ $ 2,589
Capital contribution from
Details Intermediate (see Note (f))............... 32,630
New Senior Credit Facilities......................... 255,000
---------
$ 290,219
=========
Uses of Cash:
Payment of Details Senior Credit Facilities (1) (3).. $ 107,641
Payment of DCI Facility (2) (3)...................... 72,776
Payment of merger consideration in exchange for DCI
preferred stock (3)............................... 12,316
Payment of merger consideration in exchange for DCI
common stock (3).................................. 89,439
DCI management fee agreement termination charges..... 665
Estimated fees and expense........................... 7,382
---------
$ 290,219
=========
(1) Includes $2,289 incurred in connection with the payment of fees and
expenses associated with the DCI Transaction (see Note (d)).
(2) Includes $6,827 incurred in connection with the payments to DCI option
holders (see Note (a)).
(3) Allocated between current and long-term as follows:
Current:
Details Senior Credit Facility....................... $ 5,622
DCI Facility......................................... 3,874
Merger consideration paid to preferred stockholders.. 12,316
Merger consideration paid to option holders and
common stockholders................................ 89,439
Payment for termination of DCI management fee........ 665
Less: Discount Note proceeds........................ (32,630)
---------
$ 79,286
=========
Long-term:
Details Senior Credit Facility....................... $ 102,019
DCI Facility......................................... 68,902
---------
$ 170,921
=========
(h) Reflects the write-off of $3,948 and $2,248 in unamortized deferred
financing fees related to the Details Senior Credit Facilities and the DCI
Facility, respectively, in connection with the refinancing discussed in
Note (g). The charge to equity for the write-off of deferred financing
fees of $3,656 is net of a tax benefit of $2,540 assuming an estimated 41%
effective tax rate.
(i) Reflects the asset and future liabilities related to the Company's non-
compete agreements entered into with certain senior executives of DCI.
Under the terms of the agreements, future payments are tied to compliance
with the provisions of the non-compete arrangements stipulated in each
individual's contract.
50
<PAGE>
Details, Inc.
Unaudited Pro Forma Consolidated Statement of Income
Year Ended December 31, 1997
(dollars in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DETAILS, INC.
----------------------------------------------------------------------------------
Colorado Springs
Circuits, Inc.
d/b/a NTI
Details, Inc. Statement of
Historical Operations for Adjustments
Year Ended the Period from --------------------------------
December 31, January 1, 1997 to NTI Details, Inc.
1997 December 21,1997 Recapitalization Acquisition Combined
-------------- -------------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales $ 78,756 $ 30,026 $ -- $ -- $ 108,782
Cost of goods sold 38,675 25,185 -- -- 63,860
-------------- -------------------- ------------------ ------------- -------------
Gross profit 40,081 4,841 -- -- 44,922
Operating expenses
Compensation to majority shareholder and/or CEO 2,149 -- (2,149)(a) -- --
General and administration 2,057 1,269 -- -- 3,326
Sales and marketing 7,278 1,556 -- -- 8,834
Amortization of intangibles -- -- -- 1,008 (e) 1,008
Stock compensation and related bonuses 31,271 3,663 (31,271)(b) (3,663)(f) --
-------------- -------------------- ------------------ ------------- -------------
Operating income (2,674) (1,647) 33,420 2,655 31,754
Interest income 96 -- -- -- 96
Interest expense, excluding bridge loans (12,963) (956) (6,590)(c) (1,200)(g) (21,709)
Interest expense on bridge loans (4,985) -- 4,985 (c) -- --
Income from equity investment in subsidiary -- -- -- -- --
Other income -- 13 -- -- 13
-------------- -------------------- ------------------ ------------- -------------
Income (loss) before income taxes and
extraordinary loss (20,526) (2,590) 31,815 1,455 10,154
Income tax benefit (expense) 8,030 1,275 (13,044)(d) (1,010)(d) (4,749)
-------------- -------------------- ------------------ ------------- -------------
Income (loss) before extraordinary loss $ (12,496) $ (1,315) $ 18,771 $ 445 $ 5,405
============== ==================== ================== ============= =============
EBITDA (q) $ (10) $ 507 $ 33,420 $ 3,663 $ 37,580
Depreciation and amortization, excluding
amortization of deferred financing fees $ 2,568 $ 2,141 $ -- $ 1,008 $ 5,717
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DYNAMIC CIRCUITS, INC.
-------------------------------------------------------------------------------
Cuplex
DCI Statement of
Historical Operations for
Year Ended the Period from Cuplex
December 31, January 1, 1997 to Acquisition DCI
1997 October 9,1997 Adjustments Combined
-------------- -------------------- --------------- --------------
<S> <C> <C> <C> <C>
Net sales $ 86,098 $ 59,400 $ -- $ 145,498
Cost of goods sold 54,201 51,818 -- 106,019
-------------- -------------------- --------------- --------------
Gross profit 31,897 7,582 -- 39,479
Operating expenses
Compensation to majority shareholder and/or CEO -- -- -- --
General and administration 13,521 1,747 (402)(h) 13,616
(1,250)(i)
Sales and marketing 4,431 2,526 -- 6,957
Amortization of intangibles 79 -- 268 (j) 347
Stock compensation and related bonuses 239 -- -- 239
-------------- -------------------- --------------- --------------
Operating income 13,627 3,309 1,384 18,320
Interest income 93 259 -- 352
Interest expense, excluding bridge loans (3,937) (891) (1,694)(k) (6,522)
Interest expense on bridge loans -- -- -- --
Income from equity investment in subsidiary -- 180 (180)(l) --
Other income 34 45 -- 79
-------------- -------------------- --------------- --------------
Income (loss) before income taxes and
extraordinary loss 9,817 2,902 (490) 12,229
Income tax benefit (expense) (4,112) (962) 91 (d) (4,983)
-------------- -------------------- --------------- --------------
Income (loss) before extraordinary loss $ 5,705 $ 1,940 $ (399) $ 7,246
============== ==================== =============== ==============
EBITDA (q) $ 17,109 $ 5,566 $ 1,357 $ 24,032
Depreciation and amortization, excluding
amortization of deferred financing fees $ 3,116 $ 1,593 $ 333 $ 5,042
<CAPTION>
- ------------------------------------------------------------------------------------------
Details, Inc.
DCI and DCI
Transaction Combined
Adjustments Pro Forma
------------- ---------------
<S> <C> <C>
Net sales $ -- $ 254,280
Cost of goods sold 2,000 (m) 171,879
------------- ---------------
Gross profit (2,000) 82,401
Operating expenses
Compensation to majority shareholder and/or CEO -- --
General and administration (359)(n) 16,455
(128)(p)
Sales and marketing -- 15,791
Amortization of intangibles 17,972 (m) 19,327
Stock compensation and related bonuses -- 239
------------- ---------------
Operating income (19,485) 30,589
Interest income -- 448
Interest expense, excluding bridge loans (5,515)(o) (33,746)
Interest expense on bridge loans -- --
Income from equity investment in subsidiary -- --
Other income -- 92
------------- ---------------
Income (loss) before income taxes and
extraordinary loss (25,000) (2,617)
Income tax benefit (expense) 8,600 (d) (1,132)
------------- ---------------
Income (loss) before extraordinary loss $ (16,400) $ (3,749)
============= ===============
EBITDA (q) $ 513 $ 62,125
Depreciation and amortization, excluding
amortization of deferred financing fees $ 19,998 $ 30,757
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statement of Income.
51
<PAGE>
Details, Inc.
Unaudited Pro Forma Consolidated Statement of Income
Six Months Ended June 30, 1998
(dollars in thousands)
<TABLE>
<CAPTION>
Details, Inc. DCI
Historical Historical
Six Months Six Months Details, Inc.
Ended Ended Details, Inc. DCI and DCI
June 30, June 30, DCI Transaction Combined
1998 1998 Combined Adjustments Pro Forma
------------ ------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 54,499 $ 77,220 $ 131,719 $ -- $ 131,719
Cost of Goods Sold 32,447 54,232 86,679 1,000 (m) 87,679
------------ ------------- -------------- -------------- ----------------
Gross profit 22,052 22,988 45,040 (1,000) 44,040
Operating Expenses:
General and administration 1,668 6,092 7,760 (233)(n) 7,346
(181)(p)
Sales and marketing 4,081 4,704 8,785 8,785
Amortization of intangibles 505 179 684 8,981 (m) 9,665
------------ ------------- -------------- -------------- ----------------
Operating Income 15,798 12,013 27,811 (9,567) 18,244
Interest income 155 165 320 -- 320
Interest expense (10,885) (3,138) (14,023) (2,928)(o) (16,951)
Other income 13 11 24 -- 24
------------ ------------- -------------- -------------- ----------------
Income before provision for income taxes
and extraordinary loss 5,081 9,051 14,132 (12,495) 1,637
Income tax benefit (expense) (2,295) (4,281) (6,576) 4,300 (d) (2,276)
------------ ------------- -------------- -------------- ----------------
Income (loss) before extraordinary loss 2,786 4,770 7,556 (8,195) (639)
EBITDA (q) $ 19,104 $ 15,145 $ 34,249 $ 396 $ 34,645
Depreciation and amortization, excluding
amortization of deferred financing fees 3,138 2,956 6,094 9,963 16,057
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statement of Income.
52
<PAGE>
DETAILS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31, 1997 and
Six Months Ended June 30, 1998
(dollars in thousands)
(a) Reflects cost savings as a result of the cancellation of the employment
agreement with the Company's CEO as a direct result of the
Recapitalization. The CEO's employment was terminated on October 28, 1997.
(b) Reflects the elimination of the charge recorded for stock options vested
under Holding's 1996 Stock Option Plan. In conjunction with the
Recapitalization, all remaining options under the 1996 Stock Option Plan
were exchanged for options to purchase Class A Common and Class L Common.
All options to purchase Class A Common and Class L Common under the
Holdoing's Stock Option Plans qualify for fixed plan accounting treatment.
Under fixed plan accounting, changes in the fair value of Holding's common
stock relative to the exercise price of the underlying options will not
result in additional charges (or credits) to the Details Capital's
statement of income.
(c) The increase in pro forma interest expense as a result of the
Recapitalization is as follows:
<TABLE>
<CAPTION>
Year Ended
December 31
1997
--------------------
<S> <C>
Elimination of Details, Inc. historical
interest expense and fees
related to debt repaid in connection
with the Recapitalization $ (9,233)
--------------------
Details Senior Credit Facilities (assuming LIBOR
at 5.84%)
Tranche A-$31.1 million @ LIBOR plus 2.50% (funded
on October 28, 1997) 2,154
Tranche B-$50 million @ LIBOR plus 2.75% (funded
on October 28, 1997) 3,568
Senior Subordinated Notes-$100 million (funded on
November 15, 1997) 8,794
Other bank fees and unused commitment fees on the
Revolving Credit Facility 124
Amortization of deferred financing fees
Tranche A and B 617
Senior Subordinated Notes 566
---------------------
Total interest from recapitalization 15,823
---------------------
Net increase in pro forma interest from the Recapitalization,
excluding interest on the bridge loans $ 6,590
======================
Elimination of interest expense incurred on bridge loans $ (4,985)
======================
</TABLE>
The bridge loans were obtained in connection with the Recapitalization and
were repaid with a portion of the proceeds from the Senior Subordinated
Notes issued by Details Inc. and Senior Discount Notes issued by Details
Capital. The Details Inc. Senior Credit Facilities are being refinanced in
connection with the DCI Transaction (see Note (o)).
(d) Represents the income tax adjustment required to result in a pro forma
income tax provision based on: (i) the Company's historical tax provision
using historical amounts and; (ii) the direct tax effects of the pro forma
53
<PAGE>
transactions described herein at an estimated 41% effective tax rate as
adjusted to exclude the adjustments to goodwill resulting from the NTI
Acquisition, the Cuplex Acquisition and the DCI Transaction which amounts
are not deductible for income tax purposes.
(e) Represents the adjustment to reflect ongoing goodwill amortization
resulting from the NTI Acquisition. Approximately $25,200 was recorded as
a preliminary estimate of goodwill, and such amount is being amortized over
a twenty five year period. Under purchase accounting, the final purchase
price will be allocated to the acquired assets and assumed liabilities of
NTI based on their relative fair values as of the closing date of the NTI
Acquisition, which will be determined within one year after such date.
Accordingly, the final allocations may result in an increase or decrease in
the amounts allocated to goodwill, therefore the amortization and
depreciation expense may be different from the amounts reflected herein and
such differences may be significant.
(f) Reflects the elimination of bonuses paid to certain senior executives and
other employees of NTI immediately prior to the NTI Acquisition. Bonuses
were funded through capital contributions made by selling shareholders of
NTI, as required by the NTI purchase and sale agreement.
(g) The increase to pro forma interest expense as a result of the Company's
draw down on its acquisition line under the Senior Credit Facilities in
connection with the NTI Acquisition on December 22, 1997 is as follows:
<TABLE>
<CAPTION>
Year Ended
December
31, 1997
-------------------
<S> <C>
Elimination of NTI historical interest expense on NTI
indebtedness repaid in connection with the NTI
Acquisition $ (956)
Senior Credit Facility
Acquisition Facility - $25 million @ 5.84% LIBOR plus 2.5% 2,029
Amortization of deferred financing fees 127
-------------------
Net increase in interest $ 1,200
===================
</TABLE>
The Acquisition Facility will be repaid in connection with the refinancing
of the Company's Senior Credit Facilities in connection with the DCI
Transaction (See Note (o)).
(h) Reflects elimination of operating lease costs on related party leases for
building space which was purchased in connection with the Cuplex
Acquisition on October 9, 1997. The lease expense savings is net of
additional depreciation expense on the building acquired in connection with
the Cuplex Acquisition.
(i) In connection with the Cuplex Acquisition, DCI paid a signing bonus to the
senior executive responsible for certain of the operations of Cuplex post-
acquisition. This signing bonus represents a non-recurring expense of DCI
incurred as a direct result of the Cuplex Acquisition.
(j) Represents the adjustment to reflect ongoing goodwill amortization
resulting from the Cuplex Acquisition and the Design Plus acquisition. The
acquisitions resulted in goodwill of approximately $9,200 which is being
amortized over a twenty five year period.
54
<PAGE>
(k) Reflects the increase to DCI pro forma interest expense as a result of
borrowings incurred under the DCI Facility and the repayment of prior
indebtedness in connection with the Cuplex Acquisition on October 9, 1997
as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
1997
---------------------
<S> <C>
Elimination of Cuplex historical interest expense on
Cuplex indebtedness repaid in connection with the
Cuplex Acquisition. $ (891)
Elimination of DCI historical interest expense on DCI
indebtedness repaid in connection with the Cuplex
Acquisition. (2,491)
DCI Senior Credit Facility:
DCI Senior Credit Facility 4,257
Amortization of deferred financing fees 819
---------------------
Net increase in interest $ 1,694
=====================
</TABLE>
The DCI Facility will be repaid in connection with the DCI Transaction (see
Note (o)).
(l) Represents the elimination of income from Cuplex's equity investments in
Cumex and Spectramask. Both investments were spun off as a direct result
of the Cuplex Acquisition.
(m) Represents the amortization of the intangible assets and goodwill resulting
from the estimated excess of the purchase price over the net book value of
DCI, less the amortization of Cuplex goodwill, calculated as though the DCI
Transaction occurred on January 1, 1997. In addition, reflected is the
depreciation related to the step-up to fair market value of the fixed
assets of DCI in connection with the DCI Transaction. Intangibles,
goodwill, and the fixed asset step-up are expected to be amortized over
lives ranging from four to thirty years. Under purchase accounting, the
total purchase price will be allocated to the acquired assets and assumed
liabilities of DCI based on their relative fair values as of the closing
date of the DCI Transaction, which will be determined within one year after
such date. Accordingly, the final allocations and resulting increases in
amortization and depreciation expense will be different from the amounts
reflected herein and such differences may be significant.
(n) Represents the elimination of management fees incurred in connection with
DCI's management agreement with Bain Capital which will be terminated in
connection with and as a direct result of the DCI Transaction. The
Company's obligations under the Details management agreement with Bain
Capital will not be changed as a result of the DCI Transaction.
55
<PAGE>
(o) The increase in pro forma interest expense as a result of the DCI
Transaction is as follows:
<TABLE>
<CAPTION>
Year Ended Six Months
December June 30,
31, 1997 1998
------------- ------------
<S> <C> <C>
Elimination of DCI pro forma interest expense and
fees on pro forma DCI indebtedness repaid in
connection with the DCI Transaction $ (6,522) $ (3,138)
Elimination of Details, Inc. pro forma interest expense
and fees on pro forma Details, Inc. indebtedness
repaid in connection with the DCI Transaction (10,260) (5,083)
------------- ------------
(16,782) (8,221)
------------- ------------
New Senior Credit Facilities (assuming LIBOR at 5.65%)
Tranche A-$90 million @ LIBOR plus 2.25% 7,110 3,555
Tranche B-$165 million @ LIBOR plus 2.50% 13,448 6,724
Revolving Credit Facility - $-0- million @ LIBOR
plus 2.25% - -
Unused commitment fee on Revolving Credit
Facility of $45 million @ 0.5% 225 113
Amortization of deferred financing fees
Tranche A 369 185
Tranche B 625 312
Revolving Credit Facility 184 92
Imputed interest on deferred payments(1) 336 168
------------- ------------
Total interest on debt incurred in connection with the
DCI Transaction 22,297 11,149
------------- ------------
Net increase in interest in connection with the DCI
Transaction $ 5,515 $ 2,928
============= ============
</TABLE>
(1) See Notes (a) and (i) of Notes to the Unaudited Consolidated Pro Forma
Balance Sheet.
(p) Represents the adjustment to reflect income from Design Plus, of which 80%
was acquired by DCI on June 24, 1998. DCI's pro rata share of the net
income of $128 and $181 has been reflected, in the year ended December 31,
1997 and the six months ended June 30, 1998, respectively.
(q) EBITDA is defined herein as income before provision for income taxes,
depreciation, amortization, interest expense and the non-cash expense
recorded for certain DCI stock compensation.
56
<PAGE>
(c) Exhibits:
2.1 Stock Contribution and Merger Agreement dated as of July 23, 1998 by
and among Details Holdings Corp., Dynamic Circuits Inc. and the
stockholders of Dynamic Circuits Inc.
2.2 Agreement to furnish copies of omitted annexes, schedules and exhibits
to the Stock Contribution and Merger Agreement.
4.1 Credit Agreement dated as of July 23, 1998 among Details Capital Corp,
Details, Inc., Dynamic Circuits Inc., the Lenders (as defined therein)
from time to time parties thereto, Bankers Trust Company, as
documentation and co-syndication agent, and The Chase Manhattan Bank,
as collateral, co-syndication and administrative agent.
4.2 Guarantee and Collateral Agreement made by Details Intermediate
Holdings Corp., Details Capital Corp., Details, Inc., Dynamic Circuits
Inc. and certain of their subsidiaries in favor of The Chase Manhattan
Bank, as administrative agent, dated as of July 23, 1998.
23.1 Consent of PricewaterhouseCoopers L.L.P.
57
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned hereunto duly authorized.
DETAILS CAPITAL CORP.
DETAILS, INC.
By: /s/ Bruce D. McMaster
------------------------------
Name: Bruce D. McMaster
Title: President
Date: August 5, 1998
58
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibits Page
- ----------- ------------------------ ----
2.1 Stock Contribution and Merger Agreement dated as of
July 23, 1998 by and among Details Holdings Corp.,
Dynamic Circuits Inc. and the stockholders of
Dynamic Circuits Inc.
2.2 Agreement to furnish copies of omitted annexes,
schedules and exhibits to the Stock Contribution and
Merger Agreement.
4.1 Credit Agreement dated as of July 23, 1998 among
Details Capital Corp, Details, Inc., Dynamic Circuits
Inc., the Lenders (as defined therein) from time to time
parties thereto, Bankers Trust Company, as
documentation and co-syndication agent, and The
Chase Manhattan Bank, as collateral, co-syndication
and administrative agent.
4.2 Guarantee and Collateral Agreement made by Details
Intermediate Holdings Corp., Details Capital Corp.,
Details, Inc., Dynamic Circuits Inc. and certain of their
subsidiaries in favor of The Chase Manhattan Bank, as
administrative agent, dated as of July 23, 1998.
23.1 Consent of PricewaterhouseCoopers L.L.P.
59
<PAGE>
STOCK CONTRIBUTION AND MERGER AGREEMENT
DATED AS OF JULY 23, 1998
BY AND AMONG
DETAILS HOLDINGS CORP.
AND
DYNAMIC CIRCUITS INC.
AND
THE STOCKHOLDERS OF
DYNAMIC CIRCUITS INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
ARTICLE I
<S> <C>
CONTRIBUTION AND MERGER............................................... 4
1.1. CONTRIBUTION OF DCI COMMON STOCK................................ 4
1.2. DISCOUNT NOTES.................................................. 4
1.3. MERGERCO I MERGER............................................... 4
1.4. OPTION AND BONUS PLAN PAYMENTS.................................. 5
1.5. CONVERSION OF OPTIONS........................................... 5
1.6. DETAILS BANK DEBT............................................... 6
1.7. MERGERCO II MERGER.............................................. 6
1.8. DELIVERIES...................................................... 7
ARTICLE II
THE CLOSING........................................................... 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES............................................. 7
3.1. Representations and Warranties of Details Holdings and DCI...... 7
3.2. SEVERAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS...... 23
ARTICLE IV
COVENANTS............................................................. 25
4.1. Waiver of Rights and Termination of DCI Stockholders Agreement.. 25
4.2. Termination of Certain Agreements............................... 26
4.3. ACCESS TO INFORMATION........................................... 26
4.4. OPERATION OF BUSINESS........................................... 26
4.5. EFFORTS TO CONSUMMATE; COOPERATION.............................. 27
4.6. STOCKHOLDERS AGREEMENT.......................................... 27
4.7. INDEMNIFICATION................................................. 27
4.8. NON-COMPETITION................................................. 28
4.9. ASSIGNMENT OF RIGHTS............................................ 28
4.10. TAX REPORTING................................................... 28
4.11. CONTINUATION OF CUPLEX OBLIGATIONS.............................. 29
4.12. STOCKHOLDER CONSENT............................................. 29
</TABLE>
<PAGE>
<TABLE>
ARTICLE V
<S> <C>
CONDITIONS OF CLOSING................................................. 30
5.1. GENERAL CONDITIONS.............................................. 30
5.2. CONDITIONS TO OBLIGATION OF DETAILS HOLDINGS.................... 30
5.3. CONDITIONS TO OBLIGATION OF DCI AND THE STOCKHOLDERS............ 32
ARTICLE VI
INDEMNIFICATION....................................................... 34
6.1. INDEMNIFICATION................................................. 34
6.2. MONETARY LIMITATIONS............................................ 35
6.3. CALCULATION OF LOSSES........................................... 35
6.4. SMALL CLAIMS THRESHOLD.......................................... 36
6.5. SATISFACTION OF CLAIMS.......................................... 36
6.6. NATURE AND SURVIVAL; TIME LIMITS................................ 37
6.7. LIMITATION ON REMEDIES.......................................... 38
6.8. THIRD PARTY CLAIMS.............................................. 38
6.9. NON-CIRCULARITY................................................. 39
6.10. BENEFICIARIES................................................... 39
6.11. RESOLUTION OF CLAIMS............................................ 39
ARTICLE VII
TERMINATION........................................................... 39
7.1. RIGHT OF TERMINATION............................................ 39
7.2. EFFECT OF TERMINATION........................................... 40
ARTICLE VIII
MISCELLANEOUS......................................................... 40
8.1. INTERPRETIVE PROVISIONS; CERTAIN DEFINITIONS.................... 40
8.2. STOCKHOLDER REPRESENTATIVE...................................... 41
8.3. EXPENSES........................................................ 41
8.4. LEGAL COUNSEL................................................... 42
8.5. ENTIRE AGREEMENT; AMENDMENT..................................... 42
8.6. SEVERABILITY.................................................... 42
8.7. PUBLIC ANNOUNCEMENT............................................. 42
8.8. NOTICES......................................................... 43
8.9. COUNTERPARTS.................................................... 45
8.10. GOVERNING LAW................................................... 45
8.11. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.................. 45
8.12. BENEFITS OF AGREEMENT........................................... 46
</TABLE>
<PAGE>
ANNEXES
-------
I - DCI Security Ownership
II - Redemption & Contribution
III - Details Holdings Security Ownership
-
SCHEDULES
---------
1.8 - Closing Date Deliveries
3.1(b) - Consents
3.1(c) - Equity Investments
3.1(e) - Financial Statements
3.1(f) - Undisclosed Liabilities
3.1(g) - Changes
3.1(h) - Contracts, Agreements, and Purchase Orders
3.1(i) - Litigation and Claims
3.1(j) - Real Property
3.1(l) - Intellectual Property
3.1(m) - ERISA Matters
3.1(n) - Transactions with Affiliates
3.1(o) - Insurance Policies
3.1(p) - Taxes
3.1(q) - Compliance with Laws
3.1(r) - Environmental Matters
3.1(s) - Customers and Suppliers
3.1(t) - Bank Accounts
4.2 - Contracts to be terminated At Closing
5.1 - Documents
8.2 - Expenses
EXHIBITS
--------
EXHIBIT 1.3 - Form of Mergerco I Merger Agreement
EXHIBIT 1.7 - Form of Mergerco II Merger Agreement
EXHIBIT 4.8 - Details Holdings Charter Amendment
EXHIBIT 4.12 - Stockholders Consent
EXHIBIT 5.2(h) - Form of Opinion of McCutchen, Doyle, Brown & Enersen
EXHIBIT 5.3(f)(i) - Form of Opinion of Ropes & Gray
EXHIBIT 5.3(f)(ii)- Form of Opinion of Straddling, Yocca, Carlson & Rauth
<PAGE>
DEFINITIONS
-----------
The following capitalized terms, which may be used in more than one Section
or other location of this Agreement, are defined in the following Sections or
other locations:
<TABLE>
<CAPTION>
TERM SECTION
- ---- -------
<S> <C>
Affiliate.......................................................... 3.1(n)
Agreement.......................................................... Caption
Audited Balance Sheet.............................................. 3.1(e)
Audited Financial Statements....................................... 3.1(e)
Bain Funds......................................................... 1.2(b)
By-Laws............................................................ 3.1(a)
Capital............................................................ Preamble
Charter............................................................ 3.1(a)
Class A Stock...................................................... Preamble
Class L Stock...................................................... Preamble
Closing............................................................ Article III
Closing Date....................................................... Article III
Code............................................................... 3.1(m)
Conflicting Organization........................................... 4.9
Contribution....................................................... Preamble
Conversion Securities.............................................. 3.1(d)(iii)
Cuplex Agreement................................................... 4.13
DCI................................................................ Caption
DCI Common Stock................................................... Preamble
DCI Disclosure Schedules........................................... 3.1
DCI Indemnitees.................................................... 6.1(a)
DCI Options........................................................ Preamble
DCI Securities..................................................... Preamble
DCI Stockholders Agreement......................................... 4.1
Details Capital.................................................... Preamble
Details Holdings................................................... Caption
Details Holdings Charter Amendment................................. 4.8
Details Holdings Common Stock...................................... Preamble
Details Holdings Disclosure Schedules.............................. 3.1
Details Holdings Stockholders Agreement............................ 4.6
Details Indemnitees................................................ 6.1(b)
Details Intermediate............................................... Preamble
Details Options.................................................... 1.4(b)
Details Securities................................................. 3.1(d)
Details Stockholders............................................... 3.1(d)
Discount Notes..................................................... Preamble
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Document(s)........................................................ 5.1
Employee Plan...................................................... 3.1(m)(ii)
Employment Agreements.............................................. 5.2(e)
Encumbrances....................................................... 3.1(k)
Environmental Laws................................................. 3.1(r)(i)
Environmental Permits.............................................. 3.1(r)(i)
ERISA.............................................................. 3.1(m)
ERISA Affiliate.................................................... 3.1(m)
Financial Statements............................................... 3.1(e)
Former Cuplex Shareholders......................................... 4.11
GAAP............................................................... 3.1(e)
Governmental Authority............................................. 3.1(b)
Hazardous Substance................................................ 3.1(r)(iv)
Indebtedness....................................................... 3.1(h)
Indemnified Party.................................................. 6.7
Indemnifying Party................................................. 6.7
Intercompany Note.................................................. Preamble
Interim Balance Sheet.............................................. 3.1(e)
Interim Financial Statements....................................... 3.1(e)
Laws............................................................... 3.1(q)(i)
Leased Real Property............................................... 3.1(j)(ii)
Leases............................................................. 3.1(j)(ii)
Listed Intellectual Property....................................... 3.1(l)
Loss(es)........................................................... 6.1(a)
Material Adverse Effect............................................ 3.1(a)
Material Contract(s)............................................... 3.1(h)
Mergerco I......................................................... Preamble
Mergerco I Merger Agreement........................................ 1.3(c)
Mergerco II........................................................ Preamble
Mergerco II Merger Agreement....................................... 1.7(b)
Material Intellectual Property..................................... 3.1(l)
Minimal Amount..................................................... 6.4
New Details Warrants............................................... 1.1
New Senior Credit Facility......................................... 1.2
Option Agreements.................................................. 5.2(f)
Ordinary Course of Business........................................ 3.1(f)
Out-of-the-Money Options........................................... 1.4
Permits............................................................ 3.1(q)(ii)
Permitted Encumbrances............................................. 3.1(k)
Person............................................................. 3.1(b)
Preferred Stock.................................................... Preamble
Relying Party...................................................... 3.1
Representing Party................................................. 3.1
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Returns............................................................ 3.1(p)(i)
Series A Preferred Stock........................................... Preamble
Series B Preferred Stock........................................... Preamble
Shares............................................................. 3.2(c)
Stockholder(s)..................................................... Caption
Stockholder Representative......................................... 8.2
Stockholder Representative Indemnitee.............................. 8.2
Tax(es)............................................................ 3.1(p)
Termination Date................................................... 7.1(b)
Unvested DCI Options............................................... Preamble
Unvested Details Options........................................... 1.4
Vested DCI Options................................................. Preamble
Vested Details Options............................................. 1.4
Warrants........................................................... Preamble
</TABLE>
<PAGE>
STOCK CONTRIBUTION AND MERGER AGREEMENT dated as of July 23, 1998 (the
"Agreement"), among DETAILS HOLDINGS CORP., a California corporation ("Details
Holdings"), DYNAMIC CIRCUITS INC., a Delaware corporation ("DCI"), and EACH OF
THE PERSONS OR ENTITIES IDENTIFIED ON THE SIGNATURE PAGES HERETO AS A
STOCKHOLDER (each, a "Stockholder" and collectively, the "Stockholders").
WHEREAS, the Stockholders are the only holders of all of the issued
and outstanding shares of capital stock of DCI, with each Stockholder owning
that number of shares of common stock, $.001 par value (the "DCI Common Stock"),
and/or Series A Cumulative Redeemable Preferred Stock, $.001 par value (the
"Series A Preferred Stock") and/or Series B Redeemable Preferred Stock, $.001
par value (the "Series B Preferred Stock", and together with the Series A
Preferred Stock, the "Preferred Stock");
WHEREAS, certain Stockholders and other Persons listed on Annex I are
the only holders of vested options to acquire DCI Common Stock (the "Vested DCI
Options") and/or unvested options to acquire DCI Common Stock (the "Unvested DCI
Options" and together with the Vested DCI Options, the "DCI Options"). The
shares of DCI Common Stock, the shares of Preferred Stock, the Vested DCI
Options, the Unvested DCI Options and the Warrants held by the Stockholders are
referred to herein as the "DCI Securities";
WHEREAS, at the Closing, each Stockholder will contribute a portion of
his shares of DCI Common Stock to Details Holdings in exchange for Details
Holdings Common Stock (as defined below) and warrants to purchase shares of
Class A Common Stock, no par value, of Details Holdings (the "Class A Stock"),
all upon the terms and subject to the conditions set forth in this Agreement
(the "Contribution");
WHEREAS, the parties intend that the Contribution qualify as an
exchange under Section 351 of the Code;
WHEREAS, on the Closing Date, immediately after the Contribution,
Details Holdings will contribute all of the DCI Common Stock received by it in
connection with the Contribution to Details Intermediate Holdings Corp.
("Details Intermediate"), its wholly-owned subsidiary;
WHEREAS, immediately thereafter, Details Intermediate and each of the
Bain Funds will contribute all of their remaining DCI Common Stock to Details
Merger Corp. I, a Delaware corporation ("Megerco I") in exchange for common
stock of Mergerco I;
WHEREAS, immediately thereafter, (a) Details Intermediate will issue
discount notes from which it will receive cash proceeds of approximately $33.4
million (the "Discount Notes") and will lend those proceeds to DCI in return for
an intercompany note (the "Intercompany Note") and (b) DCI will use the proceeds
of the borrowing evidenced by the
<PAGE>
intercompany note to repay, in part, the outstanding indebtedness under its
existing senior credit facility (the "DCI Facility");
WHEREAS, immediately thereafter, Mergerco I will merge with and into
DCI in a transaction in which (a) each outstanding share of common stock of
Mergerco I will be converted into one outstanding share of common stock of the
surviving corporation, (b) each outstanding share of DCI Common Stock held by
Mergerco I will be cancelled for no consideration, (c) each outstanding share of
DCI Common Stock not held by Mergerco I will be converted into the right to
receive a cash payment from the surviving corporation, (d) each outstanding
share of Series A Preferred Stock will be converted into the right to receive a
cash payment from the surviving corporation, and (e) each outstanding share of
Series B Preferred Stock will remain outstanding;
WHEREAS, the parties intend that Mergerco I be treated as a transitory
corporation and disregarded for tax purposes;
WHEREAS, DCI will incur indebtedness under a new senior credit
facility and use the proceeds thereof to (a) repay the remaining outstanding
indebtedness under the DCI Facility, (b) pay the merger consideration owed to
former holders of shares of DCI Common Stock and Series A Preferred Stock, (c)
make cash payments to the holders of DCI Options to the extent set forth in
written agreements among Details Holdings, DCI and such holders and (d) pay
certain fees and expenses;
WHEREAS, the inclusion of DCI in the consolidated group of Details
Holdings following the consummation of the transactions contemplated by this
Agreement will provide sufficient additional earning capacity to permit Details
Holdings to incur approximately $180 million of additional indebtedness;
WHEREAS, Details, Inc., an indirect wholly-owned subsidiary of Details
Holdings will incur indebtedness under a new senior credit facility and will use
the proceeds thereof to repay in full the outstanding indebtedness under its
existing senior credit facility;
WHEREAS, at the Closing, Details Holdings, DCI and each holder of DCI
Options are expected to enter into agreements pursuant to which DCI will make
cash payments to holders of vested DCI Options and agree to make deferred cash
payments, under certain circumstances, to holders of Unvested DCI Options;
WHEREAS, at the Closing, (a) the Vested DCI Options are to be
converted into vested options to acquire shares of Class A Stock and Class L
Common Stock, no par value, of Details Holdings (the "Class L Stock" and
together with the Class A Stock the "Details Holdings Common Stock") and (b) the
Unvested DCI Options are to be converted into unvested options to acquire shares
of Class A Stock and Class L Stock, respectively;
-2-
<PAGE>
WHEREAS, at the Closing, each holder of DCI Options will be granted
Cash Bonus Units under Details Holdings' newly adopted Bonus Plan;
WHEREAS, on the business day following the Closing, Details
Intermediate will contribute all of its DCI Common Stock to Details Merger Corp.
II, a Delaware corporation ("Mergerco II") in exchange for common stock of
Mergerco II;
WHEREAS, immediately thereafter, Mergerco II will merge with and into
DCI in a transaction in which (a) the outstanding shares of Mergerco II will be
converted into 100 shares of common stock of the surviving corporation, (b) each
outstanding share of DCI Common Stock held by Mergerco II will be cancelled for
no consideration, (c) each outstanding share of DCI Common Stock not held by
Mergerco II will be converted into the right to receive a cash payment from the
surviving corporation and (d) each outstanding share of Series B Preferred Stock
will remain outstanding;
WHEREAS, the parties intend that Mergerco II be treated as a
transitory corporation and disregarded for tax purposes;
WHEREAS, immediately thereafter, DCI will incur additional
indebtedness under its new senior credit facility and use the proceeds thereof
to pay the merger consideration owed to former holders of shares of DCI Common
Stock, after which DCI will be a wholly-owned subsidiary of Details Intermediate
(except for approximately $1.2 million face amount of Series B Preferred Stock);
WHEREAS, immediately following the merger of Mergerco II with and into
DCI, Details Intermediate will contribute the Intercompany Note of DCI to DCI as
a capital contribution;
WHEREAS, immediately thereafter Details Holdings will contribute all
of the issued and outstanding capital stock of Details Capital Corp. ("Details
Capital") to Details Intermediate; and
WHEREAS, immediately thereafter, Details Intermediate will contribute
all of the issued and outstanding DCI Common Stock to Details Capital, its
wholly-owned subsidiary, which will then contribute all of the issued and
outstanding DCI Common Stock to Details, Inc., its wholly-owned subsidiary.
NOW, THEREFORE, in consideration of the premises and the mutual
representations hereinafter set forth, the parties hereto hereby agree as
follows:
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<PAGE>
ARTICLE I
CONTRIBUTION AND MERGER
Upon the terms, subject to the conditions, and in reliance on the
representations, warranties and covenants set forth herein, the following events
shall occur in the order presented:
1.1. CONTRIBUTION OF DCI COMMON STOCK.
--------------------------------
Each Stockholder hereby agrees to contribute to Details Holdings at the
Closing the number of shares of DCI Common Stock set forth across from such
Stockholder's name on Annex II under the heading "Contributed Stock" in exchange
for (a) the shares of Class A Stock and Class L Stock set forth across from such
Stockholder's name on Annex II under the headings "Class A Shares" and "Class L
Shares" and (b) warrants to purchase the number of shares of Class A Stock set
forth across from such Stockholder's name on Annex II under the heading "O-T-M
Class A Warrants" which shall have an exercise price of $61.17 per share (the
"New Details Warrants").
1.2. DISCOUNT NOTES.
--------------
Details Intermediate will issue the Discount Notes and lend the proceeds
to DCI in return for the Intercompany Note. DCI will use the proceeds of the
borrowing evidenced by the Intercompany Note to repay, in part, the DCI
Facility.
1.3. MERGERCO I MERGER.
-----------------
On the Closing Date:
(a) Details Holdings will contribute all of the DCI Common Stock received
by it pursuant to Section 1.1 to Details Intermediate;
(b) Each of Bain Capital Fund V, L.P., Bain Capital Fund V-B, L.P., BCIP
Associates and BCIP Trust Associates, L.P. (collectively, the "Bain Funds") and
Details Intermediate will contribute all of the remaining DCI Common Stock then
owned by it to Mergerco I in exchange for common stock of Mergerco I;
(c) Mergerco I will merge with and into DCI pursuant to a merger
agreement (the "Mergerco I Merger Agreement") attached hereto as Exhibit 1.3.
Pursuant to the Mergerco I Merger Agreement, (i) each outstanding share of
common stock of Mergerco I will be converted into one outstanding share of
common stock of the surviving corporation, (ii) each outstanding share of DCI
Common Stock held by Mergerco I will be cancelled for no
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<PAGE>
consideration, (iii) each outstanding share of DCI Common Stock not held by
Mergerco I will be converted into the right to receive a cash payment from the
surviving corporation equal to $21,3473 per share (the number of shares of DCI
Common Stock held by each Stockholder to be so converted and the aggregate cash
consideration to be paid to such Stockholder as a result of such conversion are
set forth on Annex II under the heading "Merger Stock" and "Common Cash Merger
Consideration," respectively); (iv) each outstanding share of Series A Preferred
Stock will be converted into the right to receive a cash payment from the
surviving corporation equal to $102.63 per share (the aggregate cash
consideration to be paid each Stockholder as a result of such conversion is set
forth on Annex II under the heading "Preferred Stock Merger Consideration"), and
(v) each outstanding share of Series B Preferred Stock will remain outstanding;
and
(d) With the proceeds of borrowings under a new senior credit facility
into which DCI will enter on the Closing Date (the "New Senior Credit
Facility"), DCI will (i) repay the remaining outstanding indebtedness under the
DCI Facility, (ii) pay the Common Cash Merger Consideration and Preferred Stock
Merger Consideration, (ii) make cash payments to the holders of DCI Options to
the extent set forth in written agreements among Details Holdings, DCI and such
holders and (iv) pay certain fees and expenses.
1.4. OPTION AND BONUS PLAN PAYMENTS.
------------------------------
(a) Pursuant to the Employment Agreements and the Option Agreements, DCI
has agreed to make cash payments, on or prior to the Closing Date, to each
holder of Vested DCI Options party to such an agreement in the manner and to the
extent set forth in each such holder's agreement.
(b) Pursuant to the Employment Agreements and the Option Agreements, DCI
has agreed to make cash payments to each holder of Unvested DCI Options party to
such an agreement at the time, in the manner and to the extent set forth in each
such holder's agreement.
(c) Effective on the date hereof, Details Holdings has adopted the
Details Holdings Bonus Plan pursuant to which participants thereunder will be
entitled to cash bonuses from Details Holdings upon the terms and subject to the
conditions set forth in such Bonus Plan.
1.5. CONVERSION OF OPTIONS.
---------------------
(a) Conversion of Vested DCI Options. At the Closing, pursuant to the
--------------------------------
Employment Agreements and the Option Agreements, the Vested DCI Options are to
be converted into (i) vested options to purchase shares of Class A-5 Stock, (ii)
vested options to purchase shares of Class L Stock (the options described in
clauses (i) and (ii) collectively, the "Vested Details Options") and (iii)
vested options to purchase Class A-5 Stock with an exercise price of $61.17 per
share (the "Out-of-the-Money Options").
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<PAGE>
(b) Conversion of Unvested DCI Options. At the Closing, pursuant to the
----------------------------------
Employment Agreements and the Option Agreements, the Unvested DCI Options are to
be converted into (i) unvested options to purchase shares of Class A-5 Stock,
(ii) unvested options to purchase shares of Class L Stock (the options described
in clauses (i) and (ii) collectively, the "Unvested Details Options" and
together with the Vested Details Options, the "Details Options") and (iii)
unvested Out-of-the-Money Options. Except as may be otherwise agreed in writing
by Details Holdings and any holder of Unvested DCI Options, no Unvested DCI
Options shall vest as a result of, or in connection with, the Closing or the
transactions contemplated by the Documents. The vesting schedule for each
holder's unvested options shall be as set forth in such holder's Employment
Agreement or Option Agreement, as applicable.
1.6. DETAILS BANK DEBT.
-----------------
With borrowings it incurs under the New Senior Credit Facility and other
cash available to it, Details, Inc. will repay in full the outstanding
indebtedness under its existing senior credit facility.
1.7. MERGERCO II MERGER.
------------------
One business day after the Closing Date:
(a) Details Intermediate will contribute all of the DCI Common Stock then
owned by it to Mergerco II in exchange for common stock of Mergerco II;
(b) Mergerco II will merge with and into DCI pursuant to a merger
agreement (the "Mergerco II Merger Agreement") attached hereto as Exhibit 1.7.
Pursuant to the Mergerco II Merger Agreement, (i) all of the outstanding shares
of common stock of Mergerco II will be converted into 100 outstanding shares of
common stock of the surviving corporation, (ii) each outstanding share of DCI
Common Stock held by Mergerco II will be cancelled for no consideration, (iii)
each outstanding share of DCI Common Stock not held by Mergerco II will be
converted into the right to receive a cash payment from the surviving
corporation equal to $21.3473 per share (the number of shares of DCI Common
Stock held by each Bain Fund to be so converted and the aggregate cash
consideration to be paid such Bain Fund as a result of such conversion are set
forth on Annex II under the heading "Merger Stock" and "Common Cash Merger
Consideration," respectively); and (iv) each outstanding share of Series B
Preferred Stock will remain outstanding; and
(c) With the proceeds of borrowings under the New Senior Credit Facility,
DCI will pay the merger consideration owed to the Bain Funds.
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<PAGE>
1.8. DELIVERIES.
----------
At the Closing, Details Holdings, the Stockholders, and DCI shall make
such deliveries as are set forth on Schedule 1.8.
ARTICLE II
THE CLOSING
The closing of the Contribution and the Mergerco I Merger Agreement (the
"Closing") shall take place at the offices of Ropes & Gray, 885 Third Avenue,
New York, New York ("Ropes & Gray"), or at such other place as shall be mutually
agreeable to the parties hereto, on or prior to July 23, 1998 or if, despite all
commercially reasonable efforts of the parties hereto, the conditions to the
Closing set forth herein have not been satisfied by such date, as soon as
possible thereafter (the "Closing Date"). The closing of the Mergerco II Merger
Agreement shall take place at Ropes & Gray one business day after the Closing
Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. REPRESENTATIONS AND WARRANTIES OF DETAILS HOLDINGS AND DCI.
----------------------------------------------------------
As an inducement to enter into this Agreement and the other Documents
to which it is a party and to consummate the transactions contemplated hereby
and thereby, DCI (in such capacity, together with its subsidiaries, a
"Representing Party") hereby represents and warrants to Details Holdings (in
such capacity, a "Relying Party") as to the matters set forth in this Article
III.
As an inducement to enter into this Agreement and the other Documents
to which it is a party and to consummate the transactions contemplated hereby
and thereby, Details Holdings (in such capacity, together with its subsidiaries,
a "Representing Party") hereby represents and warrants to DCI and the
Stockholders (in such capacity, collectively, a "Relying Party") as to the
matters set forth in this Article III.
Each reference to a "Schedule" with respect to Details Holdings as the
Representing Party shall mean the disclosure schedules of Details Holdings (the
"Details Holdings Disclosure Schedules"), and each reference to a "Schedule"
with respect to DCI as the Representing Party shall mean the disclosure
schedules of DCI (the "DCI Disclosure Schedules").
(a) Organization, Good Standing, Qualification and Power. The Representing
----------------------------------------------------
Party is a corporation duly organized, validly existing and in good standing
under the laws of its
-7-
<PAGE>
state of incorporation and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as presently
conducted. The Representing Party has delivered to the Relying Party correct and
complete copies of the Representing Party's Charter and By-Laws (as hereinafter
defined), as in effect on the date hereof. The Representing Party is qualified
to do business and is in good standing as a foreign corporation in each
jurisdiction where the conduct of its business requires such qualification,
except where the failure to be so qualified has not had and could not reasonably
be expected to have a material adverse effect on the assets, properties, rights,
obligations, liabilities, condition (financial or otherwise), operations or
business of the Representing Party, taken as a whole (a "Material Adverse
Effect"). As used in this Agreement, the terms "Charter" and "By-Laws"
respectively mean, with respect to any corporation, those instruments that,
among other things, (i) define its existence, as filed or recorded with the
applicable Governmental Authority (as hereinafter defined), including such
corporation's Articles or Certificate of Incorporation, Organization or
Association and (ii) otherwise govern its internal affairs, in each case as
amended, supplemented, or restated.
(b) Authority, Enforceability, No Violation, Etc. The Representing Party
--------------------------------------------
has all requisite corporate power and authority to execute and deliver this
Agreement and the other Documents to which it is a party, to consummate the
transactions contemplated hereby and thereby and to perform its obligations
under each Document. The execution and delivery by the Representing Party of
each of the Documents to which it is or will be a party and the performance by
the Representing Party of its obligations thereunder have been duly and validly
authorized by all necessary corporate action on the part of the Representing
Party. Each of the Documents to which the Representing Party is or will be a
party is, or upon its execution and delivery will be, a valid and binding
obligation of the Representing Party, enforceable against it in accordance with
the terms thereof. Except as set forth on SCHEDULE 3.1(B), neither the
---------------
execution or delivery by the Representing Party of any of the Documents to which
it is or will be a party nor the consummation by the Representing Party of the
transactions contemplated by the Documents or the performance by the
Representing Party of its obligations thereunder will (i) conflict with or
result in a breach of any provision of the Representing Party's Charter or By-
Laws, (ii) violate any law, statute, rule or regulation or judgment, order,
writ, injunction or decree of any Governmental Authority, in each case
applicable to the Representing Party or its assets, properties or rights, (iii)
result in the imposition or creation of any Encumbrance upon or with respect to
any of the assets, properties or rights owned or used by the Representing Party
or (iv) violate, conflict with or constitute (with notice or lapse of time or
both) a default or give rise to any right of termination, cancellation or
acceleration under any of the terms, conditions or provisions of, or result in
the creation of any Encumbrance upon any of the assets or properties of the
Representing Party pursuant to the terms of, any material note, bond, lease,
mortgage, indenture, license, agreement or other material instrument or
obligation to which the Representing Party is a party or by which it or any of
its properties or assets may be bound except any such violation, conflict, or
default which is not reasonably likely to have a Material Adverse Effect.
Except as set forth on SCHEDULE 3.1(B), no material filing with, and no material
---------------
permit, authorization, consent or approval of, any individual,
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<PAGE>
corporation, association, partnership, joint venture or other entity or
organization of any kind or Governmental Authority (collectively, a "Person") is
necessary for the Representing Party's execution and delivery of the Documents
to which it is or will be a party, the consummation by the Representing Party of
the transactions contemplated thereby or the Representing Party's performance of
its obligations thereunder. As used in this Agreement, the term "Governmental
Authority" means any federal, state, local or foreign government, authority,
instrumentality, department commission, board, bureau, agency or court.
(c) Equity Investments. Except as otherwise set forth on SCHEDULE 3.1(C),
------------------ ---------------
the Representing Party does not have any subsidiaries and does not, directly or
indirectly, own or have the right to acquire any capital stock of, or other
ownership interest in, any Person. The Representing Party owns 100% of the
capital stock of each of its subsidiaries, free and clear of any Encumbrances
(except for Permitted Encumbrances and those Encumbrances listed on SCHEDULE
--------
3.1(C) and there are no outstanding options, warrants, rights, calls,
- ------
agreements, convertible securities or other commitments or rights to purchase or
acquire any unissued stock or other securities from such subsidiary (including
securities held in treasury) and no other securities of such subsidiary are
reserved for any purpose nor are there any contracts, commitments, voting
trusts, proxies (coupled with an interest or otherwise) agreement,
understandings, arrangements or restrictions to which, directly or indirectly,
the Representing Party or any of its subsidiaries is a party which relate to the
capital stock of such subsidiary.
(d) Capital Structure of the Representing Party, Title to Securities, Etc.
---------------------------------------------------------------------
(i) DCI represents and warrants that:
The authorized capital stock of DCI consists of 9,000,000 shares of
DCI Common Stock and 1,000,000 shares of Preferred Stock, of which (A)
7,073,723 shares of DCI Common Stock, 120,000 shares of Series A Preferred
Stock and 124,465 shares of Series B Preferred Stock are validly issued and
outstanding, fully paid and nonassessable and free of preemptive rights,
and are held of record by the Stockholders in the amounts listed on Annex
I, (B) 506,444 shares and 911,193 shares, respectively, are reserved for
issuance to the Persons listed on Annex I pursuant to the DCI Options and,
(C) no shares of DCI Common Stock and no shares of Preferred Stock are held
in DCI's treasury. Except for the Options there are no outstanding
options, warrants, rights, calls, agreements, convertible securities or
other commitments or rights to purchase or acquire any unissued stock or
other securities from DCI (including securities held in treasury) and no
other securities of DCI are reserved for any purpose. Except for any
Option, Warrant or agreement relating to the DCI Securities listed on
SCHEDULE 4.2, there are no contracts, commitments, voting trusts, proxies
------------
(coupled with an interest or otherwise), agreements, understandings,
arrangements or restrictions to which, directly or indirectly, DCI is a
party which relate to the DCI Securities.
-9-
<PAGE>
(ii) Details Holdings represents and warrants that:
The authorized capital stock of Details Holdings consists of 300,000
shares of Class A-1 Common Stock, 640,000 shares of Class A-2 Common Stock,
950,000 shares of Class A-3 Common Stock, 550,000 shares of Class A-4
Common Stock, 1,460,000 shares of Class A-5 Common Stock, 150,000 shares of
Class A-6 Common Stock, 650,000 shares of Class A-7 Common Stock and
475,000 shares of Class L Common Stock of which:
(A) 208,620.0204 shares of Class A-1 Common Stock, 543,244.9310
shares of Class A-2 Common Stock, 422,718.3128 shares of Class A-3
Common Stock, 449,079.4109 shares of Class A-4 Common Stock,
467,114.4504 shares of Class A-5 Common Stock, no shares of Class A-6
Common Stock, no shares of Class A-7 Common Stock and 233,593.7596
shares of Class L Common Stock are validly issued and outstanding,
fully paid and nonassessable and free of preemptive rights, and are
held of record by the Persons listed on Annex III;
(B) 157,962.5146 shares of Class A-5 are reserved for issuance to
the Persons listed on Annex III pursuant to options granted under the
1996 Performance Option Plan, the 1996 Employee Option Plan and the
1997 Equity Incentive Plan;
(C) 14,348.8558 shares of Class L Stock are reserved for issuance
to the Persons listed on Annex III pursuant to options granted under
the 1996 Performance Option Plan and the 1996 Employee Option Plan;
(D) 70,210.8536 shares of Class A-4 Stock are reserved for
issuance to Persons listed on Annex III pursuant to warrants;
(E) 8,677.7557 shares of Class L Stock are reserved for issuance
to the Persons listed on Annex III pursuant to warrants; and
(F) No shares of Class A Common Stock and no shares of Class L
Common Stock are held in Details Holdings treasury (all such
securities, collectively, the "Details Securities").
All Persons listed on Annex III are referred to herein as the "Details
Stockholders." Except for the above referenced options and warrants, there
are no outstanding options, warrants, rights, calls, agreements,
convertible securities or other commitments or rights to purchase or
acquire any unissued stock or other securities from Details Holdings
(including securities held in treasury) and no other securities of Details
Holdings are reserved for any purpose. Except for the above referenced
options
-10-
<PAGE>
and warrants and the Details Holdings Stockholders Agreement, there are no
contracts, commitments, voting trusts, proxies (coupled with an interest or
otherwise), agreements, understandings, arrangements or restrictions to
which, directly or indirectly, Details Holdings is a party which relate to
the Details Securities.
(iii) Details Holdings further represents and warrants that:
(A) 1,276,279.1690 shares of the Class A Common Stock and
162,064.5077 shares of the Class L Common Stock of Details Holdings
have been authorized for issuance to the Stockholders under the
Agreement;
(B) Options and Warrants to purchase 345,813.4610 shares of the
Class A Common Stock and 33,260.4275 shares of the Class L Common
Stock have been authorized for grant to the holders of the DCI Options
under the Agreement;
(C) Sufficient shares of Class A Common Stock and Class L Common
Stock are reserved for issuance upon exercise of the Details Options
to be granted under the Employment Agreements and the Option
Agreements and the New Details Warrants (the shares of Class A Common
Stock and Class L Common Stock issuable upon the foregoing exercise
together with the shares of Details Holdings Common Stock described in
subparagraph (A) above and the Options and Warrants collectively
referred to as the "Conversion Securities");
(D) Assuming the validity of the representations and warranties
of each Stockholder contained in Section 3.2 hereof, the Details
Holdings Common Stock to be issued pursuant to this Agreement, when
issued in compliance with the Agreement, will be (i) validly issued,
fully paid and nonassessable, free and clear of any Encumbrances
except as set forth in the Details Holdings Stockholders Agreement and
(ii) issued in compliance with all applicable federal and state
securities laws;
(E) No holder of any security of Details Holdings or any other
Person is entitled to any preemptive or similar statutory or
contractual rights, either arising pursuant to any agreement or
instrument to which Details Holdings or any of its subsidiaries is a
party or that are otherwise binding upon Details Holdings in
connection with the issuance of the Conversion Securities.
(e) Financial Information.
---------------------
(i) Annex A to SCHEDULE 3.1(E) contains complete and accurate copies
---------------
of (A) the audited consolidated balance sheet of the Representing Party as
of December 31, 1997 (the "Audited Balance Sheet"), and the related audited
consolidated
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<PAGE>
statements of income and cash flows for the year then ended (together with
the Audited Balance Sheet, the "Audited Financial Statements"), together
with the report thereon of the Representing Party's independent certified
public accountants and (B) the unaudited consolidated balance sheet of the
Representing Party as of March 31, 1998 (the "Interim Balance Sheet") and
the related unaudited statements of income and cash flows for the 3-month
period then ended (together with the Interim Balance Sheet, the "Interim
Financial Statements"). The Audited Financial Statements and the Interim
Financial Statements are collectively called the "Financial Statements."
(ii) Except as set forth on SCHEDULE 3.1(E), the Representing
---------------
Party's Financial Statements (A) were prepared in accordance with the books
and records of the Representing Party, (B) fairly present, in all material
respects, the financial position of the Representing Party at and as of the
dates indicated and the results of operations of the Representing Party for
the periods indicated (subject, in the case of the Interim Balance
Financial Statements, to normal year-end adjustments which will not, in the
aggregate, be material and to the lack of footnotes) and (C) have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") consistently applied throughout the period covered
thereby, subject, in the case of Interim Financial Statements, to normal
year-end adjustments which will not, in the aggregate, be material and to
the lack of footnotes.
(iii) Annex B of SCHEDULE 3.1(E) contains (A) the Consolidated
---------------
EBITDA of the Representing Party for the 12 months ended on each of March
31, 1998 and June 30, 1998 after giving pro forma effect to each Investment
by the Representing Party or any of its subsidiaries in any subsidiary of
the Representing Party (or any Person which becomes a subsidiary of the
Representing Party) and each acquisition of assets (including, in each
case, the Incurrence of Indebtedness in connection therewith) as if such
Investment and/or acquisition occurred on the first day of each such period
(adjusted for bona fide pro forma expense and cost reductions and related
adjustments) and (B) the Representing Party's contribution to the
Consolidated EBITDA of Details Holdings for the 12 months ended on each of
March 31, 1998 and June 30, 1998 after giving pro forma effect to the items
described in clause (a) and the transactions contemplated hereby (including
the Incurrence of Indebtedness in connection with the transactions
contemplated hereby) as if the Closing occurred on the first day of each
such period (adjusted for bona fide pro forma expense and cost reductions
and related adjustments). No representation is being made that the
adjustments described above for bona fide pro forma expense and cost
reductions and related adjustments were calculated on a basis consistent
with Regulation S-X under the Securities Act. For purposes of this Section
3.1(e)(iii), "Consolidated EBITDA," "Investment," "Incurrence" and
"Indebtedness" shall have the respective meanings set forth in the
Indenture dated November 18, 1997 between Details Capital Corp. (as
successor to Details Holdings Corp.) and the State Street Bank and Trust
Company, as trustee (as amended).
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<PAGE>
(f) Absence of Undisclosed Liabilities. The Representing Party does not
----------------------------------
have any liabilities or obligations (accrued, absolute, contingent or otherwise)
of a type required to be reflected on a balance sheet prepared in accordance
with GAAP that were not disclosed or reflected on the Interim Balance Sheet
except (i) those liabilities incurred in the ordinary course of business
consistent with past custom and practice (including with respect to quantity,
frequency and timing) ("Ordinary Course of Business") since the date of the
Interim Balance Sheet and (ii) liabilities disclosed on SCHEDULE 3.1(F).
---------------
(g) Absence of Changes. Since the date of the Interim Balance Sheet there
------------------
has been no event or circumstance which has had or could reasonably be expected
to have a Material Adverse Effect. Further, since the date of the Interim
Balance Sheet, the business of the Representing Party has been operated in the
Ordinary Course of Business and, except as set forth in the Documents or on
SCHEDULE 3.1(G), there has been no (i) deviation from historical methods of
- ---------------
accounting, including any change in accounting practices concerning slow selling
inventory, or material deviations from other practices in connection with the
maintenance of the Representing Party's books and records, (ii) damage,
destruction or loss which is not fully covered by insurance and which has had or
can reasonably be expected to have a Material Adverse Effect on the Representing
Party, (iii) declaration or payment of any dividend or other distribution on or
with respect to the shares of capital stock of the Representing Party, or any
direct or indirect redemption, purchase or other acquisition of any of such
shares (except, in the case of DCI, for the transactions set forth in Section
1.2), (iv) increase in or prepayment of compensation payable or to become
payable by the Representing Party to any of its senior executives, or the making
of any bonus payment or similar arrangement to or with any of them, except in
the Ordinary Course of Business or pursuant to any of the Documents, (v)
cancellation of material indebtedness due to the Representing Party from others
(other than the write-off of accounts receivable in the Ordinary Course of
Business), (vi) material change in the manner in which the Representing Party
extends discounts or credits to customers, (vii) material change in the manner
in which the Representing Party markets inventory, (viii) sale, transfer or
other disposition of a material portion of the assets of the Representing Party,
except in the Ordinary Course of Business and for fair value, or scrapping of a
material portion of the assets of the Representing Party as obsolete, (ix)
binding commitments for capital expenditures of the Representing Party in excess
of $1,000,000 in the aggregate, or (x) change in the Representing Party's
policies with respect to the payment of accounts payable or other current
liabilities and the collection of accounts receivable, including any
acceleration or deferral of the payment or collection thereof, as applicable.
(h) Agreements, Etc. SCHEDULE 3.1(H) sets forth an accurate and complete
---------------- ---------------
list of each contract or agreement, whether written or oral (including any and
all amendments thereto) to which the Representing Party is a party or by which
the Representing Party is bound (each such contract or agreement, a "Material
Contract," and collectively, the "Material Contracts") and which:
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<PAGE>
(i) relates to Indebtedness (as defined below) including a letter
of credit or similar arrangement issued for the account or benefit of the
Representing Party or a guarantee of any Indebtedness or any other Person;
(ii) relates to the purchase, maintenance or acquisition, or sale or
furnishing or materials, supplies, merchandise, machinery, equipment, parts
or any other property or services (excluding any such contract made in the
Ordinary Course Business of the Representing Party and which is expected to
be fully performed within twelve (12) months of the date hereof or which
involves revenues or expenditures of less than $1,000,000);
(iii) is a collective bargaining agreement or contract with any
labor union;
(iv) prohibits or restricts the Representing Party from competing
with any business, or obligates the Representing Party to conduct any
business with only certain parties, or otherwise restrains or prevents the
Representing Party from carrying on any lawful business in any geographic
area;
(v) relates to the use and protection of confidential information
and Intellectual Property of the Representing Party's customers and end-
users;
(vi) relates to employment, compensation, severance or consulting
between the Representing Party and any of its respective officers,
directors, employees or consultants who are entitled to compensation
thereunder (including any profit-sharing, bonus, stock option, pension,
retirement, savings, stock purchase, stock appreciation, hospitalization
insurance or similar plan or agreement, formal or informal, providing
benefits to any current or former officers, directors, employees or
consultants);
(vii) is a purchase agreement, conditional sales agreement,
occupancy agreement, license, lease or sublease for real property, which in
the case of a license, lease or sublease has a term of more than twelve
(12) months, and involves annual payments in excess of $500,000;
(viii) is a lease, sublease or other title retention agreement or
conditional sales agreement involving payments aggregating in excess of
$1,000,000 for any machinery, equipment, vehicle or other tangible personal
property (whether the Representing Party is a lessor or lessee);
(ix) is a contract for capital expenditures or the acquisition or
construction of fixed assets involving payments in excess of $1,000,000; or
(x) is a joint venture or partnership contract or other contract
involving the sharing of profits, losses, costs or liabilities.
-14-
<PAGE>
Except as set forth on SCHEDULE 3.1(H), (A) all of the Material Contracts are in
---------------
full force and effect and enforceable in all material respects by the
Representing Party in accordance with their terms except to the extent that such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally and to
general principles of equity, (B) the Representing Party is not in material
breach of or default under (and no event has occurred which with notice or the
passage of time or both would constitute a material breach or default under) any
Material Contract listed, and (C) the Representing Party has not given nor, to
the Representing Party's knowledge, has it received from any other Person, at
any time since December 31, 1997, any notice or other communication regarding
any material breach of, or default under, any Material Contract which has not
been cured or waived.
For purposes of this Agreement, "Indebtedness" of any Person means all
obligations of such Person (i) for borrowed money, (ii) evidenced by notes,
bonds, debentures or similar instruments, (iii) under capital leases or (iv) in
the nature of guarantees of the obligations described in clauses (i) through
(iii) above of any other Person.
(i) Litigation. Except as set forth on SCHEDULE 3.1(I), there is no
---------- ---------------
action, suit, claim, audit, investigation or legal, administrative or
arbitration proceeding pending or, to the Representing Party's knowledge,
threatened against the Representing Party, whether at law or in equity, whether
civil or criminal in nature and whether before or by any Governmental Authority,
excluding workers compensation claims incurred in the Ordinary Course of
Business. Except as set forth on SCHEDULE 3.1(I), there are no judgments,
---------------
decrees, injunctions or orders of any Governmental Authority binding upon the
Representing Party. The Representing Party is not in default under any
judgment, decree, injunction or order.
(j) Real Property.
-------------
(i) The Representing Party does not own, directly or indirectly,
any real property or improvements thereon.
(ii) Set forth on SCHEDULE 3.1(J) is a list of all real property
---------------
leased (the "Leased Real Property") by the Representing Party, the date of
each lease agreement and any amendments thereto or modifications thereof
(whether written or oral) (collectively, the "Leases"), and whether there
is any requirement to obtain the consent of any Person under each Lease to
the transactions contemplated by this Agreement (including the placement of
Encumbrances on such Lease or the property subject thereto).
(iii) Except as set forth on SCHEDULE 3.1(J), the Representing Party
---------------
does not own or hold and is not obligated under or a party to any option,
right of first refusal or other contractual right to purchase, acquire,
sell or dispose of any parcel of Leased Real Property or any portion
thereof or interest therein. The Representing Party is not
-15-
<PAGE>
a lessor, sublessor or grantor under any contract granting to another
Person any right to the possession, use, occupancy or enjoyment of any
parcel of Leased Real Property.
(k) Title to Assets, Properties and Rights and Related Matters. The
----------------------------------------------------------
Representing Party has marketable title to all the properties, interests in
properties and assets, real, personal or mixed, reflected as being owned on the
Interim Balance Sheet by the Representing Party (except for those sold or
otherwise disposed of in the Ordinary Course of Business since the Interim
Balance Sheet Date), and to those acquired by the Representing Party after the
Interim Balance Sheet Date and not sold or otherwise disposed of since their
acquisition, free and clear of all Encumbrances (as defined below) of any kind
or character, except (i) liens for current taxes not yet due and payable, (ii)
Encumbrances securing taxes, assessments, governmental charges or levies or the
Encumbrances of materialmen, carriers, landlords and like persons, all of which
are not yet due and payable, (iii) minor Encumbrances of a character which are
not reasonably expected to have a Material Adverse Effect on the Representing
Party, (iv) Encumbrances securing Indebtedness listed on SCHEDULE 3.1(K) or (v)
---------------
Encumbrances securing Indebtedness incurred in connection with the Agreement
("Permitted Encumbrances"). As used herein, the term "Encumbrances" shall mean
and include any security interests, mortgages, liens, pledges, charges,
easements, reservations, restrictions, rights of way, servitudes, options,
rights of first refusal, rights of first offer, community property interests,
restrictions of any kind and all other encumbrances, whether or not relating to
the extension of credit or the borrowing of money.
(l) Intellectual Property. Part A of SCHEDULE 3.1(L) sets forth an
--------------------- ---------------
accurate and complete list of all material patents, pending patent applications,
trademarks, service marks, pending trademark or service mark applications and
trade names licensed to, assigned to, applied for or registered in the name of,
the Representing Party, or which the Representing Party uses in its business,
and all material copyright registrations or pending applications for copyright
registrations of the Representing Party, or which the Representing Party uses in
its business, including the nature (e.g., patent, trademark, etc.) of such
----
intellectual property, the application or registration number, the jurisdiction
and the record owner (all such intellectual property which is or should have
been listed on Part A of SCHEDULE 3.1(L) being referred to as the "Listed
---------------
Intellectual Property"). Part B of SCHEDULE 3.1(L) also sets forth all material
---------------
licenses (other than licenses for "shrink wrapped" off-the-shelf software) to
which the Representing Party is a party and that directly relate to the Listed
Intellectual Property or any other material intellectual property rights
(including inventions, drawings, mask works, trade secrets, customer lists,
software, technical information, data, process technology, plans, blueprints,
know-how and confidential information) currently used by the Representing Party
or necessary to permit the Representing Party to conduct its business as now
conducted (the Listed Intellectual Property and the other intellectual property
rights are collectively called the "Material Intellectual Property"). Except as
set forth on Part C of SCHEDULE 3.1(L):
---------------
(i) no registration, patent or other governmental document relating
to the Material Intellectual Property has lapsed, expired or been abandoned
or canceled or is
-16-
<PAGE>
the subject of cancellation proceedings or otherwise held invalid or
unenforceable with respect to the Material Intellectual Property;
(ii) the Representing Party owns or possesses adequate and
enforceable licenses, assignments, or other authorizations (free of
Encumbrances other than Permitted Encumbrances and free of any obligation
to make payment to any third party for the use thereof) to use all Material
Intellectual Property;
(iii) the Representing Party has not infringed on or misappropriated,
and is not now infringing on or misappropriating, any intellectual property
right belonging to any Person based on the operations of the Representing
Party within the last three years, and no claim has been made or is pending
or, to the knowledge of the Representing Party, threatened to the effect
that any Material Intellectual Property is invalid, unenforceable or
infringes on or misappropriates the rights of any other Person;
(iv) to the Representing Party's knowledge, no Person is infringing
upon, misappropriating or violating any of the Material Intellectual
Property in any material respect;
(v) the Representing Party has taken reasonable security measures
to protect the secrecy, confidentiality and value of its and its customers'
trade secrets, proprietary processes and formulae, inventions, know-how,
customer lists and other confidential and proprietary information; and
(vi) the Representing Party has not licensed or granted rights to
any third party to use any of the Material Intellectual Property, other
than to customers in the Ordinary Course of Business.
(m) Benefit Plans; ERISA Matters. Except as set forth in SCHEDULE 3.1(M):
---------------------------- ---------------
(i) All Employee Plans (as defined below) have been operated and
administered in all material respects in accordance with applicable law
(including ERISA and the Code);
(ii) neither the Representing Party nor any of it ERISA Affiliates
has maintained, currently maintains, is obligated to make any contributions
to, or has any liability with respect to, any Employee Plan;
(iii) neither the Representing Party nor any of its ERISA Affiliates,
any other "disqualified person" or "party in interest" (as defined in
Section 4975 of the Code and Section 3 of ERISA respectively) with respect
to an Employee Plan has breached the fiduciary rules of the ERISA or
engaged in a prohibited transaction which could subject
-17-
<PAGE>
the Representing Party or its ERISA Affiliates to any tax or penalty
imposed under Sections 495 of the Code or Section 502(i), (j) or (1) of
ERISA;
(iv) all reporting and disclosure obligations imposed under ERISA
and the Code have been satisfied in all material respects with respect to
each Employee Plan;
(v) each Employee Plan which is a "group health plan" within the
meaning of Section 5000 of the Code has been maintained in all material
respects in compliance with Section 4980B of the Code and Title I, Subtitle
B, Part 6 of ERISA and no tax payable on account of Section 4980B of the
Code has been or would reasonably be expected to be incurred;
(vi) no benefit payable or which may become payable by the
Representing Party or its ERISA Affiliates pursuant to any Employee Plan
shall constitute an "excess parachute payment," within the meaning of
Section 280G of the Code, which is or may be subject to the imposition of
an excise tax under Section 4999 of the Code or which would not be
deductible by reason of Section 280G of the Code;
(vii) no Employee Plan currently maintained by the Representing
Party or its ERISA Affiliates is or was a "multiple employer plan" (within
the meaning of Section 413 of the Code);
(viii) neither the Representing Party nor any of its ERISA Affiliates
is, or ever has been, obligated to contribute to any "multi-employer plan"
(within the meaning of Section 3 of ERISA) or other plan subject to Title
IV of ERISA; and
(ix) other than as required under Section 601 et seq. of ERISA, no
------
Employee Plan provides benefits or coverage following retirement or
termination of employment.
As used in this Agreement, "Employee Plan" means any "employee benefit plan" (as
that term is defined in Section 3 of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), as well as any other plan, program or arrangement
involving direct and indirect compensation, whether covering a single individual
or a group of individuals, under which the Representing Party, or any entity
that is a member of a "controlled group of corporations" with, or is under
"common control" with, the Representing Party as defined in Section 414(b) or
(c) of the Internal Revenue Code of 1986, as amended (the "Code") (an "ERISA
Affiliate"), has or may have any present or future obligations or liability on
behalf of its employees or former employees, contractual employees or their
dependents or beneficiaries. The Representing Party has delivered to the
Relying Party correct and complete copies of all Employee Plans and related
documents. The Relying Party acknowledges and agrees that the only
representations and warranties of the Representing Party herein as to any ERISA
matters are those contained in this Section 3.1(m).
-18-
<PAGE>
(n) Transactions with Affiliates. Except as set forth in Part A of
----------------------------
SCHEDULE 3.1(N) and except for employment arrangements entered into in the
- ---------------
Ordinary Course of Business and which are disclosed on SCHEDULE 3.1(H), (i)
---------------
since August 19, 1996, in the case of DCI and its subsidiaries as Representing
Party, and October 28, 1997, in the case of Details Holdings and its
subsidiaries as Representing Party, the Representing Party has not purchased,
acquired or leased any property or services from, or sold, transferred or leased
any property or services to, or loaned or advanced any money to, or borrowed any
money from or entered into or been subject to any management, consulting or
similar agreement with, Affiliates and (ii) the Representing Party is not party
to an agreement pursuant to which it is obligated to do any of the foregoing.
The term "Affiliate," with respect to any Person, means any stockholder of such
Person or any other Person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with such
Person. Except as set forth in Part B of SCHEDULE 3.1(N), no Affiliate of the
---------------
Representing Party is indebted to the Representing Party for money borrowed or
other loans or advances (except for advances of business expenses in the
Ordinary Course of Business).
(o) Insurance. SCHEDULE 3.1(O) contains an accurate and complete list and
--------- ---------------
a brief description of all material insurance policies currently in effect which
are presently owned or held by the Representing Party, insuring the products,
properties, assets, business and operations of the Representing Party and its
potential liabilities to third parties, copies of which have been delivered to
Relying Party. As of the date of this Agreement, all premiums due have been
paid and no notice of cancellation or termination or intent to cancel has been
received by the Representing Party with respect to any such policy. To the
knowledge of the Representing Party, the Representing Party is not in material
default under any such insurance policies.
(p) Taxes. Except as set forth on SCHEDULE 3.1(P):
----- ---------------
(i) The Representing Party has filed all material returns,
declarations of estimated tax, tax reports, information returns and
statements required to be filed by it prior to the Closing Date relating to
any material Taxes with respect to any income, assets or operations of the
Representing Party, other than those for which extensions shall have been
granted prior to the Closing Date (collectively, the "Returns");
(ii) the Returns are true and correct in all material respects;
(iii) the Representing Party has paid, or made adequate provision in
accordance with GAAP, for the payment of all Taxes for the periods ending
on or before the Closing Date;
(iv) the Representing Party has not waived any statute of
limitations affecting any Tax liability or agreed to any extension of time
during which a Tax assessment or deficiency assessment may be made;
-19-
<PAGE>
(v) there are no pending examinations by any taxing authority of
any Returns of the Representing Party and the Representing Party has not
received written notice of any unresolved questions or claims concerning
its Tax liability;
(vi) the Representing Party has withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or owing to
any shareholder, employee, creditor, independent contractor, or other third
party;
(vii) other than Encumbrances for Taxes not yet due and payable,
there are no Encumbrances on any of the assets of the Representing Party
that arose in connection with any failure (or alleged failure) to pay any
Tax; and
(viii) the unpaid Taxes of the Representing Party do not exceed the
reserve for Tax liability set forth in the Interim Balance Sheet as
adjusted for the passage of time including any Tax liability incurred in
the Ordinary Course of Business since the date of the Interim Balance Sheet
established in accordance with GAAP.
The term "Tax" or "Taxes" means, with respect to any Person, all income taxes
(including any tax on or based upon net income, gross income, or income as
specifically defined, or earnings, profits, or selected items of income,
earnings or profits) and all gross receipts, sales, use, ad valorem, transfer,
franchise, license, withholding, payroll, employment or windfall profits taxes,
alternative or add-on minimum taxes, imposts or customs duties together with any
interest and any penalties, additions to tax or additional amounts imposed by
any taxing authority on such Person. The Representing Party is not a party to
any Tax sharing agreement. The Relying Party acknowledges and agrees that the
only representations and warranties of the Representing Party herein as to any
Tax matters (other than ERISA matters, which are covered by Section 3.1(m)
above) are those contained in this Section 3.1(p).
(q) Compliance with Laws. Except as set forth on SCHEDULE 3.1(Q):
-------------------- ---------------
(i) the Representing Party is (and since June 30, 1996 has been) in
material compliance with all applicable laws, rules, regulations,
ordinances, decrees and orders of any Governmental Authority (other than
Environmental Laws, which are covered by Section 3.1(r)) (collectively,
"Laws") and has not received any notice of any alleged claim or threatened
claim, violation of or liability under any such Law which has not
heretofore been cured or for which there is no remaining liability;
(ii) The Representing Party has all governmental permits, licenses,
consents, approvals, franchises and other authorizations necessary for the
conduct of its business as presently conducted ("Permits");
(iii) all of the Permits are valid, binding, and in full force and
effect;
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<PAGE>
(iv) no loss or expiration of any such Permit is pending or
reasonably foreseeable or to the knowledge of the Representing Party
threatened; and
(v) the Representing Party is in compliance with the material terms
of such Permits.
(r) Environmental Matters.
---------------------
(i) The Representing Party has all Permits (collectively, the
"Environmental Permits") which are required in connection with the
ownership of its assets and properties and the operation of its business
under all federal, state and local statutes, laws, codes, regulations,
ordinances, rules, principles of common law, judgments, orders, decrees,
injunctions, concessions, grants, franchises, agreement or governmental
restrictions relating to the environment, including relating to health or
safety, pollution or the generation, handling, storage, transport,
disposal, discharge or release of any materials or substances into the
environment except for those failures which, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect (collectively,
"Environmental Laws");
(ii) all such Environmental Permits are in full force and effect,
and no action or proceeding is pending or to the knowledge of the
Representing Party threatened to revoke, rescind, limit or otherwise modify
any Environmental Permit;
(iii) the Representing Party is in compliance in all material
respects with the terms and conditions of all Environmental Permits and
other limitations, restrictions, conditions, rules and regulations,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in or issued, entered or promulgated under or pursuant
to any Environmental Law applicable to it or its business;
(iv) the Leased Real Property and owned Real Property is free of
contamination from any toxic or hazardous substance or waste, including any
petroleum or petroleum-derived substance or waste or any asbestos
containing material, as defined in any applicable Environmental Laws (a
"Hazardous Substance") except for such contamination that could not
reasonably be expected to have a Material Adverse Effect and except as set
forth in Schedule 3.1(r)(iv);
(v) Except as set forth in Schedule 3.1(r)(v), the Representing
Party:
(A) has not discharged or released any Hazardous Substance
except for discharges or releases which, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect;
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<PAGE>
(B) is not liable or responsible for clean up costs,
remedial work or damages (including any natural resource damages) in
connection with the generation, handling, storage, transport,
disposal, discharge or release of any Hazardous Substance prior to the
Closing Date;
(C) has not received any notice under any Environmental
Laws of any asserted violation, proceeding, investigation or lawsuit
arising out of or related to the operation, of the business of the
Representing Party or any-claim for clean-up costs, remedial work or
damages from any Person in connection with the generation, handling,
storage, transport, disposal, discharge or release of any Hazardous
Substance except for those which, in the aggregate could not
reasonably be expected to have a Material Adverse Effect;
(D) has not entered into any agreement with any Person
pursuant to which the Representing Party has assumed responsibility
for, either directly or indirectly as a guarantor or surety, or
otherwise agreed to contribute to, the remediation of any condition
arising from or relating to the generation, handling, storage,
transport, disposal, discharge or release of any Hazardous Substance;
and
(E) has not filed any notice under any applicable
Environmental Law reporting any past or present generation, handling,
storage, transport, disposal, discharge or release of any Hazardous
Substance.
The Representing Party has delivered to the Relying Party, correct and complete
copies of all environmental studies, reports, audits, or analyses in the
Representing Party's possession relating to the assets and properties owned or
leased by the Representing Party. The Relying Party acknowledges and agrees that
the only representations and warranties of the Representing Party herein as to
any environmental matters are those contained in this Section 3.1(r).
(s) Intentionally Omitted.
---------------------
(t) Banking Facilities. SCHEDULE 3.1(T) sets forth a true, correct and
------------------ ---------------
complete list of:
(i) each bank, savings and loan or similar financial institution in
which the Representing Party has an account or safety deposit box or other
arrangement, and any number or other identifying codes of such accounts,
safety deposit boxes or other arrangements; and
(ii) the names of all persons authorized to draw one each such
account or have access to any such safety deposit facility or such other
arrangement.
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<PAGE>
(u) Labor Relations; Employees. There is no pending or, to the knowledge
--------------------------
of the Representing Party, threatened unfair labor practices complaint against
the Representing Party before the National Labor Relations Board or any
comparable governmental authority. There is no labor strike, dispute, slowdown
or stoppage pending or, to the knowledge of the Representing Party, threatened
against the Representing Party. No representation question currently exists
respecting the employees of the Representing Party. No collective bargaining
agreement is currently in force or is being negotiated by the Representing
Party.
(v) Brokers. Other than Bain Capital, Inc. and Celerity Partners, no
-------
agent, broker, investment banker or other Person acting on behalf of the
Representing Party or under the authority of the Representing Party is or will
be entitled to any fee or commission directly or indirectly from the
Representing Party in connection with any of the transactions contemplated
hereby.
(w) NO ADDITIONAL REPRESENTATIONS. THE REPRESENTING PARTY IS NOT MAKING
-----------------------------
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER
WITH RESPECT TO THE REPRESENTING PARTY, INCLUDING ANY OF THE ASSETS, PROPERTIES
OR RIGHTS OF THE REPRESENTING PARTY, EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES EXPRESSLY SET FORTH IN THIS SECTION 3.1, AND EXCEPT AS EXPRESSLY SET
FORTH IN THIS SECTION 3.1, THE CONDITION OF THE ASSETS, PROPERTIES AND RIGHTS OF
THE REPRESENTING PARTY, SHALL BE "AS IS" AND "WHERE IS."
3.2. SEVERAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.
----------------------------------------------------------
Each Stockholder, severally as to himself or itself only and not
jointly or as to any other Stockholder of DCI, represents and warrants to
Details Holdings as follows:
(a) Authority, Enforceability, No Violation, Etc. Such Stockholder has the
---------------------------------------------
full and absolute power to enter into each Document to which it is or will be a
party and perform its other obligations under each such Document. The execution
and delivery by such Stockholder of each Document to which it is or will be a
party and the performance by such Stockholder of its obligations thereunder have
been duly and validly authorized by all necessary action (corporate or
otherwise) on the part of such Stockholder. Each Document to which such
Stockholder is or will be a party has been, or upon its execution and delivery
will be, duly and validly executed and delivered by such Stockholder and is, or
upon its execution and delivery will be, a valid and binding obligation of such
Stockholder, enforceable against such in accordance with its terms. Neither the
execution or delivery by such Stockholder of any Document to which it is or will
be a party, the consummation by such Stockholder of the transactions
contemplated by the Documents nor the performance by such Stockholder of its
obligations thereunder will (i) conflict with or result in a breach of any
provision of such Stockholder's Charter or By-Laws (if applicable), (ii) violate
any material law, statute, rule or
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<PAGE>
regulation or judgment, order, writ, injunction or decree of any Governmental
Authority, in each case applicable to such Stockholder or the Securities owned
by such Stockholder, or (iii) conflict with or result in a default or breach of
any provision of any material contract or agreement to which Stockholder is a
party or by which the DCI Securities owned by such Stockholder may be bound and
which would have a material adverse effect on such Stockholder's ability to
perform its obligations under the Documents to which such Stockholder is or will
be party. Assuming that no Representing Party has breached the representation
set forth in the fourth sentence of Section 3.1(b) and no other Stockholder has
breached the representation set forth in this sentence, no material filing with,
and no material permit, authorization, consent or approval of, any Person is
necessary on the part of the Stockholder for the consummation by the Stockholder
of the transactions contemplated by the Documents.
(b) Ownership. Such Stockholder is the lawful owner, of record and
---------
beneficially, of the DCI Securities owned by such Stockholder (which are those
DCI Securities listed across from such Stockholder's name on Annex I) and has
good title to such Securities, free and clear of any and all Encumbrances other
than liens for taxes not yet due and payable and has no other interest in any
DCI Securities.
(c) Details Common Stock. Such Stockholder understands that the
--------------------
securities of Details Holdings to be delivered in connection with the
Contribution and which may be purchased upon exercise of the Options and the
Warrants (the "Shares") have not been registered or qualified under the
Securities Act of 1933, as amended (the "Securities Act"), or any state
securities laws by reason of specified exemptions therefrom which depend upon,
among other things, the representations and warranties, of such Stockholder set
forth in this Section 3.2(c). Such Stockholder is able to bear the economic risk
of holding the Shares for an indefinite period of time and is experienced and
has such knowledge and experience in financial and business matters that he is
capable of evaluating the risks and merits of acquiring the Shares. Such
Stockholder acknowledges that all of the securities of Details Holdings received
hereunder will bear a legend to the effect that transfers are restricted unless
(i) the transfer is exempt from the registration requirements under the
Securities Act and Details Holdings receives an opinion of counsel satisfactory
to it to that effect, or (ii) the transfer is made pursuant to an effective
registration statement under the Securities Act.
(d) Registration of Details Common Stock. Such Stockholder understands
------------------------------------
that Details Holdings is under no obligation to effect a registration of the
Shares under the Securities Act and that the obligation of Details Holdings to
effect a registration of the Shares is limited as set forth in the Details
Holdings Stockholders Agreement.
(e) Investment Intent. Such Stockholder is acquiring the Shares for such
-----------------
Stockholder's own account and not with a view to, or for sale in connection
with, the distribution thereof within the meaning of the Securities Act.
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<PAGE>
(f) Accredited Investor. Such Stockholder is an Accredited Investor
-------------------
within the definition set forth in Rule 501(a) of the Securities Act with
respect to the Shares and is resident at the address set forth on his or her
Employment Agreement or Option Agreement, as applicable.
(g) Access to Information regarding Details Holdings and DCI. Such
--------------------------------------------------------
Stockholder has been provided access to such information and documents regarding
Details Holdings and DCI as such Stockholder has requested and has been afforded
an opportunity to ask questions of, and receive answers from, representatives of
Details Holdings and DCI concerning the terms and conditions of this Agreement
and the Shares.
(h) Independent Investment Decision. Recognizing that each Stockholder,
-------------------------------
officer and director of DCI has his own distinct financial interest in the
transactions contemplated by this Agreement and that certain Stockholders and
directors have a financial interest in DCI, Details Holdings and/or a
prospective purchaser of the Discount Notes, each Stockholder hereby approves
and ratifies the actions of each other Stockholder, the officers and directors
of DCI in the negotiation of this Agreement and the transactions contemplated
hereby and confirms that he has made an independent investment decision to enter
into this Agreement.
(i) Brokers. No agent, broker, investment banker or other Person acting
-------
on behalf of such Stockholder or under the authority of such Stockholder is or
will be entitled to any fee or commission directly or indirectly from Details
Holdings or DCI in connection with any of the transactions contemplated hereby.
(j) NO ADDITIONAL REPRESENTATIONS. SUCH STOCKHOLDER IS NOT MAKING ANY
REPRESENTATION OR WARRANTY, JOINT OR SEVERAL, EXPRESS OR IMPLIED, OF ANY NATURE
WHATSOEVER WITH RESPECT TO ITSELF (EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
EXPRESSLY SET FORTH IN THIS SECTION 3.2), OR WITH RESPECT TO ANY OTHER
STOCKHOLDER OR DCI (INCLUDING AS TO ANY OF THE ASSETS, PROPERTIES OR RIGHTS OF
DCI).
ARTICLE IV
COVENANTS
4.1. WAIVER OF RIGHTS AND TERMINATION OF DCI STOCKHOLDERS AGREEMENT.
--------------------------------------------------------------
Each Stockholder (a) hereby waives application of the provisions of
the Stockholders Agreement, dated as of August 19, 1996 among DCI and the
shareholders of DCI party thereto (as amended, the "DCI Stockholders Agreement")
in connection with the transactions contemplated by the Documents to the extent
such rights are applicable and
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<PAGE>
(b) agrees that the DCI Stockholders Agreement shall terminate and the
provisions thereof shall be of no further force and effect concurrently with the
Closing.
4.2. TERMINATION OF CERTAIN AGREEMENTS.
----------------------------------
Concurrently with the Closing, each of the Contracts and option plans
listed on SCHEDULE 4.2 shall be automatically terminated without any further
------------
action by the parties thereto or any further liability of any party thereunder.
4.3. ACCESS TO INFORMATION.
---------------------
From and after the date hereof until the Closing Date, DCI and Details
Holdings will afford to each other, their counsel and authorized representatives
free and full access upon reasonable notice and during normal business hours
(but without reasonable interruption of either's business) to all of its
facilities, management and books and records relating to their business
(including tax returns filed and in preparation) as either Details Holdings or
DCI may reasonably request.
4.4. OPERATION OF BUSINESS.
---------------------
(a) From and after the date hereof until the Closing, except as
contemplated by the Documents or as otherwise consented to in writing, DCI and
Details Holdings and each of their respective subsidiaries will:
(i) conduct their business only in the Ordinary Course of Business;
(ii) not dispose of any assets with a fair market value of $100,000
individually or $500,000 in the aggregate, except sales of inventories in
the Ordinary Course of Business;
(iii) use commercially reasonable efforts to maintain their
business, assets, properties and rights in accordance with past custom and
practice;
(iv) not reclassify, combine, split, subdivide, or pay or declare a
dividend in respect of, or redeem or otherwise repurchase any capital stock
or issue, deliver, pledge or encumber any additional capital stock or other
securities equivalent to or exchangeable for capital stock;
(v) not acquire or agree to acquire by merging or consolidating
with, or by purchasing any material portion of the capital stock,
partnership interests or assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof;
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<PAGE>
(vi) not pay, discharge or satisfy any material claims, liabilities
or obligations (whether absolute, accrued, contingent or otherwise), other
than the payment, discharge or satisfaction of liabilities in the Ordinary
Course of Business;
(vii) not change the accounting methods or practices followed,
including any change in any assumption underlying, or method of
calculating, any bad debt, contingency or other reserve, except as may be
required by changes in GAAP; and
(viii) not amend or modify in any way their respective Charters or
By-Laws.
4.5. EFFORTS TO CONSUMMATE; COOPERATION.
----------------------------------
(a) Subject to the terms and conditions of this Agreement, each party
hereto shall use commercially reasonable efforts to take or cause to be taken
all actions and do or cause to be done all things required under applicable
laws, regulations and ordinances in order to consummate the transactions
contemplated hereby, including (i) obtaining all material permits,
authorizations, consents and approvals of any Governmental Authority which are
required for or in connection with the consummation of the transactions
contemplated hereby and by the other Documents, (ii) taking any and all
reasonable actions necessary to satisfy all of the conditions to the other
party's obligations hereunder as set forth in Article V and (iii) executing and
delivering all agreements and documents required by the terms hereof to be
executed and delivered by such party on or prior to the Closing.
(b) Each party hereby agrees to cooperate with each other in determining
whether any filings are required to be made or consents required bo be obtained
in any jurisdiction in connection with the consummation of the transactions
contemplated by this Agreement and in making or causing to be made any such
filings promptly and in seeking to obtain timely any such consents.
4.6. STOCKHOLDERS AGREEMENT.
----------------------
By executing this Agreement, each Stockholder agrees that from and after
the Closing Date, without any further action on the part of such Stockholder,
such Stockholder shall be a party to the Stockholders Agreement dated as of
October 28, 1997 among Details Holdings and its Stockholders (as defined
therein) (as amended from time to time, the "Details Holdings Stockholders
Agreement"), and the Conversion Securities acquired by such Stockholder shall be
Shares (as defined in the Details Holdings Stockholders Agreement) of the type
set forth across from such Stockholder's name on Annex II.
4.7. INDEMNIFICATION.
---------------
(a) All rights against DCI to indemnification and exculpation (including
the advancement of expenses) from liabilities for acts or omissions occurring at
or prior to the
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<PAGE>
Closing Date (including with respect to the transactions contemplated by this
Agreement) existing as of the date hereof in favor of the current or former
directors or officers of DCI as provided in its Certificate of Incorporation,
its By-laws and the indemnification agreements set forth in SCHEDULE 4.7 shall
------------
continue in full force and effect without amendment, modification or repeal in
accordance with their terms for a period of not less than six years after the
Closing Date; provided however, that if any claims are asserted or made within
-------- -------
such period, all rights to indemnification (and to advancement of expenses)
thereunder in respect of any such claims shall continue, without diminution,
until disposition of any and all such claims. Notwithstanding the foregoing, no
DCI Indemnitee will be entitled to make any claim for indemnification against
Details Holdings by reason of the fact that he, she or it (or any of his, her or
its officers, directors, agents or other representatives) was a controlling
person, director, officer, employee, agent or other representative of DCI or of
any of its subsidiaries or was serving as such for another Person at the request
of any of DCI or any of its shareholders, subsidiaries or other Affiliates
(whether such claim is pursuant to any statute, charter, by-law, contractual
obligation or otherwise) with respect to any action brought under this Agreement
by Details Holdings against any Stockholder.
(b) The provisions of this Section 4.7 are intended to be for the benefit
of, and will be enforceable by, each indemnified party, his or her heirs and his
or her representatives.
4.8. NON-COMPETITION.
---------------
In consideration of the benefits which each of them will realize upon
consummation of the transactions contemplated by this Agreement (including
receipt of substantial cash payments and equity ownership in Details Holdings in
respect of their equity ownership of DCI), each Stockholder who is an employee
of DCI immediately prior to the Closing Date hereby confirms and agrees to be
bound by the terms of the Non-Compete and Technology Transfer Agreement (or
other similar agreement) to which such employee is party. Each of the parties
to such agreements intend that such agreement be enforceable to the fullest
extent permitted by law.
4.9. ASSIGNMENT OF RIGHTS.
--------------------
Effective upon the Closing, without any further action, Celerity Circuits,
LLC hereby assigns and transfers to Details Holdings any and all rights to
indemnification it may have under the Acquisition Agreement dated as of June 12,
1996 among Celerity Circuits, LLC, DCI and Charles D. Dimick and the other
stockholders and options holders of Dynamic Circuits Inc. listed therein.
4.10.TAX REPORTING.
-------------
For tax purposes, the parties will report the transactions executed
pursuant to this Agreement on a basis consistent with the parties' intention
that the Contribution qualify as an
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exchange under section 351 of the Code and that Mergerco I and Mergerco II be
treated as transitory corporations and disregarded for tax purposes.
4.11. CONTINUATION OF CUPLEX OBLIGATIONS.
----------------------------------
Each of Ronald Ryno, Jeffrey Ryno, Vernon Morgan and Richard Galatian
(collectively, the "Former Cuplex Shareholders") who are party, together with
DCI, to that certain Stock Purchase Agreement (as amended or otherwise modified
from time to time, the "Cuplex Agreement") dated as of August 22, 1997 hereby
agree as follows:
(a) To the extent it may be required under the Cuplex Agreement or DCI's
Certificate of Incorporation, each of the Former Cuplex Shareholders hereby
consents to the consummation of each of the transactions contemplated by the
Documents.
(b) For purposes of Section 2.3 of the Cuplex Agreement, upon
consummation of the Contribution, the term Buyer Common Stock shall be deemed to
be a reference to the Class A-5 Common Stock and the Class L Common Stock
received by the Former Cuplex Shareholders pursuant to this Agreement. Any
reduction in the number of shares of Class A-5 Common Stock or Class L Common
Stock pursuant to Section 2.3 of the Cuplex Agreement (as modified by the
preceding sentence) shall be effected only at an agreed upon amount of $241.7925
per share of Class L Common Stock and $1.0468 per share of Class A-5 Common
Stock.
(c) DCI and the Former Cuplex Shareholders hereby agree that any
obligation of the Former Cuplex Shareholders to be satisfied by a reduction in
the number of shares of Series B Preferred Stock or Buyer Common Stock (as
modified by clause (b) above) of the Former Cuplex Shareholders may be satisfied
by the cancellation of such shares by DCI or Details Holdings, as applicable.
(d) Except as modified by this Section 4.11, DCI and the Former Cuplex
Shareholders hereby confirm the Cuplex Agreement as being in full force and
effect.
4.12. STOCKHOLDER CONSENT. By his execution of this Agreement, each Stockholder
-------------------
hereby grants his written consent to the adoption of the resolutions set forth
on Exhibit 4.12.
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ARTICLE V
CONDITIONS OF CLOSING
5.1. GENERAL CONDITIONS.
------------------
The respective obligations of each party to consummate the transactions
contemplated by this Agreement and the other agreements, instruments,
certificates and documents listed on SCHEDULE 5.1 (together with this Agreement,
------------
each a "Document" and, collectively, the "Documents") is subject to the
satisfaction at or prior to the Closing Date of the following conditions, unless
waived by Details Holdings and DCI:
(a) HSR Act. Any waiting period (and any extension thereof) applicable to
-------
the consummation of the transactions contemplated hereby under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended, shall have expired or
been terminated.
(b) Charter Amendment. The Details Holdings Charter Amendment shall have
-----------------
become effective.
(c) No Litigation or Legislation. There shall not be any statute, rule or
----------------------------
regulation that could reasonably be expected to have the effect of preventing,
delaying or making the transactions contemplated by any of the Documents illegal
or otherwise prohibited or any pending or threatened investigation, hearing,
order, decree or judgment enjoining or seeking to enjoin the performance of any
of the Documents or the transactions contemplated hereby or thereby or involving
any challenge to, or seeking damages, or other relief in connection with such
transactions.
(d) Funding. Details Holdings and DCI shall have received adequate
-------
assurances to their reasonable satisfaction that the permanent debt financing
described in the letters attached hereto as Exhibit 5.1(d) will be available on
the Closing Date.
5.2. CONDITIONS TO OBLIGATION OF DETAILS HOLDINGS.
--------------------------------------------
The obligation of Details Holdings to perform this Agreement is subject to
the satisfaction at or prior to the Closing Date of the following conditions,
unless waived by Details Holdings:
(a) Authorization. All corporate or other action necessary to authorize
-------------
the execution, delivery and performance of this Agreement and the other
Documents by DCI and the Stockholders and the consummation of the transactions
contemplated by this Agreement and the other Documents shall have been duly and
validly taken by DCI and the Stockholders and DCI and the Stockholders shall
have full power and authority to enter into and consummate the transactions
contemplated by this Agreement and the other Documents.
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<PAGE>
(b) Performance of Obligations of DCI and Stockholders. DCI and each of
--------------------------------------------------
the Stockholders shall have performed and complied in all material respects with
all agreements and obligations and satisfied all conditions to be performed,
complied with and satisfied by it under this Agreement and the other Documents
prior to or at the Closing and DCI shall have supplied Details Holdings with a
certificate to such effect with respect to DCI.
(c) Secretary Certificate. Details Holdings shall have received a
---------------------
certificate, dated as of the Closing Date, signed by the Secretary of DCI and
certifying as to:
(i) the Charter, By-Laws, incumbency of officers executing each of
the Documents to which DCI is a party; and
(ii) resolutions of the Board of Directors of DCI authorizing the
execution, delivery and performance by DCI of each of the Documents to
which DCI is a party.
(d) Representations and Warranties.
------------------------------
(i) the representations and warranties of DCI, in its capacity as a
Representing Party, set forth in Section 3.1 shall be true and correct as
of the date of this Agreement and except, in the case of such
representations and warranties not qualified by materiality, for those
failures which in the aggregate have not had and which could not reasonably
be expected to have a Material Adverse Effect, as of the Closing Date as
though made on and as of the Closing Date (other than any representation or
warranty that expressly relates to a specific date, which representations
and warranty shall be correct in all material respects on the date so
specified) and Details Holdings shall have received a certificate of the
President of DCI to such effect; and
(ii) the representations and warranties of each Stockholder set
forth in Section 3.2 shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on and as of the
Closing Date except in the case of such representations and warranties not
qualified by materiality, for those failures which could not reasonably be
expected to have a Material Adverse Effect.
(e) Employment Agreements. Details Holdings shall have received duly
---------------------
executed employment agreements from each of Charles Dimick, John Peters, Gregory
Halvorson, Thomas Caldwell and Eric Naroian (the "Employment Agreements").
(f) Option Agreements. Details Holdings shall have received duly executed
-----------------
Option Agreements from each holder of a DCI Option who is not party to an
Employment Agreement (the "Option Agreements").
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<PAGE>
(g) Fairness Opinion. Details Holdings shall have received an opinion
----------------
dated the Closing Date from Murray, Devine & Company (or such other independent
expert reasonably satisfactory to Details Holdings) to the effect that in its
opinion, as of the Closing Date, the transactions contemplated by this Agreement
are fair to Details Holdings from a financial point of view.
(h) Opinions of Counsel to DCI. Details Holdings shall have received an
--------------------------
opinion dated the Closing Date from McCutchen, Doyle, Brown & Enersen, counsel
to DCI, substantially in the form attached hereto as Exhibit 5.2(h).
(i) No Material Adverse Change. Since December 31, 1997, there shall not
--------------------------
have been any change which has resulted in a Material Adverse Effect with
respect to DCI and its subsidiaries and no event shall have occurred or
circumstance exist that could reasonably be expected to result in such a
Material Adverse Effect.
(j) Other Documents. Each of the Stockholders shall have duly executed
---------------
and delivered each of the Documents to which it is a party.
(k) Consents. DCI shall have received all consents set forth on SCHEDULE
-------- --------
3.1(B) of the DCI Disclosure Schedules.
- ------
5.3. CONDITIONS TO OBLIGATION OF DCI AND THE STOCKHOLDERS.
----------------------------------------------------
The obligation of DCI and each Stockholder to perform this Agreement is
subject to the satisfaction at or prior to the Closing Date of the following
conditions, unless waived by DCI:
(a) Authorization. All corporate or other action necessary to authorize
-------------
the execution, delivery and performance of this Agreement and the other
Documents by Details Holdings and the consummation of the transactions
contemplated by this Agreement and the other Documents shall have been duly and
validly taken by Details Holdings and Details Holdings shall have full power and
authority to enter into and consummate the transactions contemplated by this
Agreement and the other Documents.
(b) Performance of Obligations of Details Holdings. Details Holdings
----------------------------------------------
shall have performed and complied in all material respects with all agreements
and obligations and satisfied all conditions to be performed, complied with and
satisfied by it under this Agreement and the other Documents prior to or at the
Closing and shall have supplied DCI with a certificate to such effect.
(c) Secretary Certificate. DCI shall have received a certificate dated as
---------------------
of the Closing Date, signed by the Secretary of Details Holdings and certifying
as to:
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(i) the Charter, By-Laws, incumbency of officers executing each of
the Documents to which Details Holdings is a party; and
(ii) the resolutions of the Board of Directors of Details Holdings
authorizing the execution, delivery and performance by Details Holdings of
each of the Documents to which Details Holdings is a party.
(d) Representations and Warranties. The representations and warranties of
------------------------------
Details Holdings, in its capacity as a Representing Party, set forth in Section
3.1 shall be true and correct as of the date of this Agreement and except, in
the case of such representations and warranties not qualified by materiality,
for those failures which in the aggregate have not had and which could not
reasonably be expected to have a Material Adverse Effect, as of the Closing Date
as though made on and as of the Closing Date (other than any representation or
warranty that expressly relates to a specific date, which representations and
warranty shall be correct in all material respects on the date so specified) and
DCI shall have received a certificate of the President of Details Holdings to
such effect.
(e) Fairness Opinion. DCI shall have received an opinion dated the
----------------
Closing Date from Murray, Devine & Company (or such other independent expert
reasonably satisfactory to DCI) to the effect that in its opinion, as of the
Closing Date, the transactions contemplated by this Agreement are fair to DCI
from a financial point of view.
(f) Opinion of Counsel to Details Holdings. DCI and the Stockholders
--------------------------------------
shall have received an opinion dated the Closing Date of (i) Ropes & Gray,
counsel to Details Holdings, substantially in the form attached hereto as
Exhibit 5.3(f)(i) and (ii) Straddling, Yocca, Carlson & Rauth, special counsel
to Details Holdings, substantially in the form attached hereto as Exhibit
5.3(f)(ii).
(g) Solvency Opinion. DCI shall have received an opinion dated the Closing
----------------
Date from Murray Devine & Company (or such other independent expert reasonably
satisfactory to DCI) to the effect that in its opinion, as of the Closing Date,
the transactions contemplated by the Agreement shall not render DCI and its
subsidiaries or Details Capital and its subsidiaries insolvent.
(h) No Material Adverse Change. Since December 31, 1997, there shall not
--------------------------
have been any change which has resulted in a Material Adverse Effect with
respect to Details Holdings and its subsidiaries and no event has occurred or
circumstance exists that could reasonably be expected to result in such a
Material Adverse Effect.
(i) Consents. Details Holdings shall have received all consents set forth
--------
on SCHEDULE 3.1(B) of the Details Disclosure Schedules.
---------------
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ARTICLE VI
INDEMNIFICATION
6.1. INDEMNIFICATION.
---------------
(a) From and after the Closing Date, Details Holdings shall indemnify and
hold harmless, to the fullest extent permitted by law, subject to the
limitations set forth in Sections 6.2, 6.3, 6.4, 6.6 and 6.7, the Stockholders
and their respective partners, officers, directors, employees and agents
(collectively, the "DCI Indemnitees") from, against and in respect of any
liability, loss, cost, damage, diminution of value, deficiency, demand, claim,
suit, action or cause of action, fine, penalty, cost or expense, including the
cost or expense of any and all investigations or proceedings, settlements,
compromises, reasonable attorney's fees and expenses (being referred to herein
as, "Losses") arising from, related to or in connection with any of the
following:
(i) any breach or default in performance prior to the Closing Date
by Details Holdings of any covenant or agreement of Details Holdings
contained in this Agreement; or
(ii) any breach of any representation or warranty made by Details
Holdings and/or any of its subsidiaries, in their capacity as a
Representing Party, in this Agreement (as each such representation or
warranty would read if all qualifications as to materiality (including in
the definition of Material Adverse Effect) were deleted therefrom).
(b) From and after the Closing Date, Details Holdings shall indemnify and
hold harmless, to the fullest extent permitted by law and subject to the
limitations set forth in Sections 6.2, 6.3, 6.4, 6.6 and 6.7, the holders of
Details Holdings Common Stock on the Closing Date (as reflected in Annex III)
and their respective partners, officers, directors, employees and agents
(collectively, the "Details Indemnitees") from, against and in respect of any
Losses arising from, related to or in connection with any of the following:
(i) any breach or default in performance by DCI prior to the Closing
Date of any covenant or agreement of DCI contained in this Agreement; or
(ii) any breach of any representation or warranty made by DCI and/or
any of its subsidiaries, in their capacity as a Representing Party, in this
Agreement (as each such representation or warranty would read if all
qualifications as to materiality (including in the definition of Material
Adverse Effect) were deleted therefrom).
(c) From and after the Closing Date, each Stockholder shall, on a several
and not a joint basis, indemnify and hold harmless, to the fullest extent
permitted by law, subject to the
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limitations set forth in Sections 6.3, 6.4, 6.6 and 6.7, the Details Indemnitees
from, against and in respect of Losses arising from, related to or in connection
with (i) any breach or default in performance by such Stockholder prior to the
Closing Date of any covenant or agreement of such Stockholder contained in this
Agreement or (ii) any breach of any representation or warranty made by such
Stockholder in this Agreement (as each such representation or warranty would
read if all qualifications as to materiality (including in the definition of
Material Adverse Effect) were deleted therefrom).
6.2. MONETARY LIMITATIONS.
--------------------
(a) Except as provided in Section 6.2(c) below, Details Holdings shall not
have any obligation to indemnify any DCI Indemnitee pursuant to Section
6.1(a)(ii) unless and until (and then only to the extent that) the aggregate of
all individual Losses for which indemnity is not precluded by Section 6.4
incurred or sustained by the DCI Indemnitees in respect of Section 6.1(a)(ii)
exceeds $4,000,000. The aggregate liability of Details Holdings to indemnify
the DCI Indemnitees for Losses in respect of Section 6.1(a)(ii) shall in no
event exceed $25,000,000.
(b) Except as provided in Section 6.2(c) below, Details Holdings shall not
have any obligation to indemnify any Details Indemnitee pursuant to Section
6.1(b)(ii) unless and until (and then only to the extent that) the aggregate of
all individual Losses for which indemnity is not precluded by Section 6.4
incurred or sustained by the Details Indemnitees in respect of Section
6.1(b)(ii) exceeds $4,000,000. The aggregate liability of Details Holdings to
indemnify the Details Indemnitees for Losses in respect of Section 6.1(b)(ii)
shall in no event exceed $25,000,000.
(c) Notwithstanding the foregoing, (i) the minimum dollar limitation set
forth in the first sentence of each of Section 6.2(a) and 6.2(b) and the
provisions of Section 6.4 shall not apply to Losses arising from, related to or
in connection with any claim with respect to the representations and warranties
contained in the first sentence of Section 3.1(a), the first three sentences of
Section 3.1(b) and all of Section 3.1(d) and (ii) the minimum dollar limitation
set forth in the first sentence of each of Section 6.2(a) and 6.2(b) shall not
apply to Losses arising from any claim with respect to the representations and
warranties contained in Section 3.1(p).
6.3. CALCULATION OF LOSSES.
---------------------
The amount of the Loss of an Indemnified Party as to which indemnification
exists under this Agreement shall be calculated by taking into account (a) the
present value, based on a discount rate equal to the mid-term applicable federal
rate as determined under Section 1274(d) of the Code at the time, of any Tax
benefit actually realized by such Indemnified Party (as defined below) in
connection with or as a result of the occurrence of such Loss to the extent the
present value of such Tax benefit exceeds the present value of any Tax to be
paid by such Indemnified Party in connection with the indemnification proceeds,
(b) any insurance proceeds
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<PAGE>
actually received by such Indemnified Party (and not applied by such Indemnified
Party on an equitable basis against any portion of a Loss that is not
indemnified hereunder) and increased insurance costs incurred in connection with
or as a direct result of the occurrence of such Loss, (c) any indemnification
proceeds received by Details Holdings or such Indemnified Party (including
proceeds from the indemnification provisions described in Section 4.9 and the
indemnification provisions set forth in (i) the Amended and Restated
Recapitalization Agreement dated as of October 4, 1997 by and among DI
Acquisition Corp., Details Holdings and the stockholders listed on Schedule 1
thereto and (ii) the Cuplex Agreement) and (d) if such Loss results from the
diminution in value of such Indemnified Party's equity interest in Details
Holdings, such Loss shall be calculated based on such Indemnified Party's fully
diluted equity interest in Details Holdings at the later of the business day
after the Closing Date or the date such Loss is incurred. If the amount to be
netted pursuant to this Section 6.3 against any payment by an Indemnifying Party
of any amount otherwise required to be paid pursuant to this Article VI shall be
undetermined, the Indemnified Party shall repay to the Indemnifying Party,
promptly after such determination, any amount that Indemnifying Party would not
have had to pay (or, in the case of a payment by Details Holdings pursuant to
section 6.5(a), surrender to Details Holdings for cancellation shares of Class L
Stock Details Holdings would not have had to issue) pursuant to this Article VI
had such determination been made at the time of such payment (or issuance).
6.4. SMALL CLAIMS THRESHOLD.
----------------------
Except to the extent set forth in Section 6.2(c), no DCI Indemnitee or
Details Indemnitee shall be entitled to seek indemnification under Section
6.1(a)(ii) or Section 6.1(b)(ii) in respect of any Loss unless the amount of
such Loss incurred by all DCI Indemnitees or all Details Indemnities, as the
case may be, exceeds $50,000 (the "Minimal Amount"). If a Loss exceeds the
Minimal Amount, the DCI Indemnitees or Details Indemnitees, as the case may be,
shall be entitled to seek indemnification, subject to the other limitations in
this Section 6, for the full amount of such Loss. Notwithstanding the
foregoing, any DCI Indemnitee or Details Indemnitee shall be entitled to seek
indemnification under Section 6.1(a)(ii) or 6.1(b)(ii) in respect of an
individual Loss which does not exceed $50,000 if the claim in respect of such
Loss is one of more than one claim based on the same or related set of facts,
circumstances or occurrences, or the same or a series of related transactions
giving rise to an indemnification claim and such claims taken together involve a
Loss in excess of $50,000.
6.5. SATISFACTION OF CLAIMS.
----------------------
(a) Any claim by an Indemnified Party under Sections 6.1(a) and 6.1(b)
shall be satisfied by issuing to such Indemnified Party shares of Class L Stock.
The number of shares of Class L Stock to be issued to any individual Indemnified
Party in respect of any claim by such Indemnified Party shall be determined by
(i) calculating the amount of the Loss in respect of such claim in accordance
with Section 6.3, (ii) dividing such amount by $364.0909 and
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(iii) taking the result and dividing it by (A) one minus (B) the fully diluted
-----
equity ownership percentage of Details Holdings represented by the Details
Holdings Common Stock held by such Indemnified Party at the time such claim is
satisfied (assuming, for purposes of such calculation, that such Indemnified
Party neither acquired (other than through exercise of options or warrants held
by him on the Closing Date) nor disposed of any Details Holdings Common Stock
after the Closing Date).
(b) All Claims under Section 6.1(c) shall be satisfied in cash.
(c) For the purposes of subsection (a), when calculating the fully diluted
equity ownership percentage of Details Holdings of any Indemnified Party which
was an equity holder of both Details Holdings and DCI prior to the Closing:
(i) only those shares of Details Common Stock owned by such
Indemnified Party immediately prior to the Closing shall be included when
such Indemnified Party is a Details Indemnitee; and
(ii) only those shares of Details Common Stock issued to such
Indemnified Party under this Agreement (or acquired upon exercise of a
warrant granted to him under this Agreement) shall be included when such
Indemnified Party is a DCI Indemnitee
(d) Any issuance of shares of Class L Stock in satisfaction of a claim
under Section 6.1 shall be treated as a purchase price adjustment by the
recipient thereof.
6.6. NATURE AND SURVIVAL; TIME LIMITS.
--------------------------------
(a) Regardless of any investigation made at any time by or on behalf of
any party hereto or of any information and party may have in respect thereof,
all representations and warranties made herein or pursuant hereto or in
connection with the transactions contemplated by the Documents shall survive the
Closing and continue in effect until the first anniversary of the Closing,
except for (i) representations and warranties contained in the first sentence of
Section 3.2(a), the first three sentences of Section 3.2(b), the first three
sentences of Section 3.3(a) and all of Section 3.3(b), which shall continue in
full force and effect indefinitely, (ii) representations and warranties in
Section 3.1(p) which shall survive the Closing and continue in effect until 30
days after the running of the applicable statute of limitations and (iii)
representations and warranties contained in Section 3.1(r) which shall survive
the Closing and continue in effect until December 31, 1999. Any claim for
indemnification pursuant to this Article VI as a result of any breach of
representation or warranty must be made within the period of time during which
such representation or warranty survives the Closing pursuant to this Section
6.6(a). Any claim described in the preceding sentence made within the applicable
time period (and, to the extent of such claim, any representation or warranty
upon which such claim is based) shall survive thereafter until such
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<PAGE>
claim is finally resolved. For purposes of this Article VI (except to the
extent otherwise set forth in Section 6.8), any claim for indemnification shall
be duly made by giving written notice of such claim to the Indemnifying Party.
(b) Except to the extent otherwise set forth herein, the covenants and
agreements of the parties set forth in this Agreement shall survive
indefinitely.
6.7. LIMITATION ON REMEDIES.
----------------------
After the Closing Date, the indemnification provided in this Article VI,
subject to the limitations set forth in this Agreement, shall be the exclusive
remedy available to any Indemnified Party for any breach of any representation,
warranty or covenant to be performed prior to the Closing Date, including
without limitation any remedies under CERCLA.
6.8. THIRD PARTY CLAIMS.
------------------
Promptly after the receipt by any party entitled to indemnification (the
"Indemnified Party") pursuant to this Article VI of notice of the commencement
of any action against such Indemnified Party by a third party, such Indemnified
Party shall, if a claim with respect thereto is to be made against Details
Holdings or any Stockholder hereunder (the "Indemnifying Party") pursuant to
this Article VI, give such Indemnifying Party written notice thereof in
reasonable detail in light of the circumstances then known to such Indemnified
Party. The failure to give such notice shall not relieve any Indemnifying Party
from any obligation hereunder except where, and then solely to the extent that,
such failure actually and materially prejudices the rights of such Indemnifying
Party. Such Indemnifying Party shall have the right to defend such claim, at
such Indemnifying Party's expense and with counsel of its choice reasonably
satisfactory to the Indemnified Party, provided that the Indemnifying Party
conducts the defense of such claim actively and diligently. If the Indemnifying
Party assumes the defense of such claim, the Indemnified Party agrees to
reasonably cooperate in such defense so long as the Indemnified Party is not
materially prejudiced thereby. So long as the Indemnifying Party is conducting
the defense of such claim actively and diligently, the Indemnified Party may
retain separate co-counsel at its sole cost and expense and may participate in
the defense of such claim, and neither any Indemnifying Party nor any
Indemnified Party will consent to the entry of any judgment or enter into any
settlement with respect to such claim without the prior written consent of the
other, which consent will not be unreasonably withheld. In the event the
Indemnifying Party does not or ceases to conduct the defense of such claim
actively and diligently, (x) the Indemnified Party may defend against, and
consent to the entry of any judgement or enter into any settlement with respect
to, such claim in any manner it may reasonably deem to be appropriate, (y) the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against such claim, including attorney's
fees and expenses, and (z) the Indemnifying Party will remain responsible for
any Losses the Indemnitee may suffer as a result of such claim to the full
extent provided in this Article VI.
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<PAGE>
6.9. NON-CIRCULARITY.
---------------
Each Stockholder hereby agrees that it will not make any claim for
indemnification against Details Holdings or any of its subsidiaries by reason of
the fact that he was a controlling person, director, officer, employee, agent or
other representative of DCI or was serving as such for another Person at the
request of DCI (whether such claim is for Losses of any kind or otherwise and
whether such claim is pursuant to any statute, Charter, By-law, Contractual
Obligation or otherwise) with respect to any claim brought by the Details
Stockholders or Details Holdings relating to this Agreement or any of the
transactions contemplated hereby.
6.10. BENEFICIARIES.
-------------
(a) The provisions of Section 6.1(a) are intended to be for the benefit
of and will be enforced by, each DCI Indemnitee, his or her heirs and his or her
representatives and assigns.
(b) The provisions of Section 6.1(b) and 6.1(c) are intended to be for
the benefit of, and will be enforced by, each Details Indemnitee, his or her
heirs and his or her representatives and assigns.
6.11. RESOLUTION OF CLAIMS.
--------------------
Claims for indemnity by the Details Indemnitees shall be resolved by
agreement between the Stockholders Representative (acting on behalf of all
Stockholders) and such Details Indemnitees or, with respect to claims for
indemnity that affect all holders of Details Holdings Common Stock on the
Closing Date proportionately, the Representative (as defined in the DCI
Transaction Agreement among Details Holdings, such holders and the
Representative), acting on behalf of all holders of Details Holdings Common
Stock on the Closing Date. Claims for indemnity by the DCI Indemnitees shall be
resolved by agreement between the Representative (acting on behalf of all
holders of Details Holdings Common Stock on the Closing Date) and such DCI
Indemnitees or, with respect to claims for indemnity that affect all
Stockholders proportionately, the Stockholders Representative, acting on behalf
of all Stockholders.
ARTICLE VII
TERMINATION
7.1. RIGHT OF TERMINATION.
--------------------
This Agreement may be terminated at any time prior to the Closing by:
(a) the mutual written consent of Details Holdings and DCI; or
-39-
<PAGE>
(b) by either Details Holdings or DCI in writing, without liability to the
terminating party on account of such termination (except as otherwise provided
in Section 7.2), if the Closing shall not have occurred on or before August 20,
1998 (the "Termination Date"); or
(c) by either Details Holdings or DCI if (i) the conditions to such
party's obligations shall have become impossible to satisfy on or before the
Termination Date (after giving effect to any potential actions the non-
terminating party may propose to take to cure such failure of condition after
reasonable notice form the party proposing to terminate this Agreement),
provided that no party shall be entitled to terminate this Agreement pursuant to
this clause (c) if the reason for such impossibility is due to a breach by the
party proposing to terminate this Agreement or (ii) any permanent injunction or
other order of a Governmental Authority preventing the consummation of the
transactions contemplated hereby shall have become final and non-appealable.
7.2. EFFECT OF TERMINATION.
---------------------
Termination of this Agreement pursuant to Section 7.1 shall terminate all
obligations of the parties hereunder, except for the obligations under Section
8.3, provided that nothing herein shall relieve any party from liability for
breach hereof or of any other Document prior to termination.
ARTICLE VIII
MISCELLANEOUS
8.1. INTERPRETIVE PROVISIONS; CERTAIN DEFINITIONS.
--------------------------------------------
(a) Whenever used in this Agreement, "to the Representing Party's
knowledge" or "to the knowledge of the Representing Party" shall mean the actual
knowledge of Charles Dimick, Eric Naroian, John Peters, Gregory Halvorson and
Tom Caldwell in the case of DCI and Bruce McMaster, Lee Muse, Terry Wright and
Joseph Gisch in the case of Details Holdings. The inclusion of any information
on any Schedule shall not be deemed to be an admission or acknowledgment by, the
Representing Party in and of itself, that such information is required to be
listed on such Schedule or is material to or outside the Ordinary Course of
Business of the Representing Party or any of its Subsidiaries, as applicable.
Nothing contained herein or in any of the Exhibits or Schedules hereto shall
constitute an admission of liability or an admission against the Representing
Party interest.
(b) The use in this Agreement of the term "including" means "including,
without limitation." The words "herein," "hereof," "hereunder," and other words
of similar import refer to this Agreement as a whole, including the schedules
and exhibits, and not to any particular section, subsection, paragraph,
subparagraph or clause contained in this Agreement.
-40-
<PAGE>
All references to sections, schedules and exhibits mean that sections of this
Agreement and the schedules and exhibits attached to this Agreement, except
where otherwise stated. The title of and the section and subsection headings in
this Agreement are for convenience of reference only and shall not govern or
affect the interpretation of any of the terms or provisions of this Agreement.
The use herein of the masculine, feminine or neuter forms shall also denote the
other forms and any reference to the singular or plural shall include the other,
in each case unless the context otherwise requires.
(c) Unless expressly provided otherwise, the measure of a period of one
month or year for purposes of this Agreement shall be that date of the following
month or year corresponding to the starting date, provided that if no
corresponding date exists, the measure shall be that date of the following month
or year corresponding to the next day following the starting date. For example,
one month following February 18th is March 18th, and one month following March
31 is May 1.
8.2. STOCKHOLDER REPRESENTATIVE.
--------------------------
Each Stockholder hereby (a) authorizes the Stockholder Representative to
take any and all actions (including the waiver of rights hereunder and the
compromise of claims pursuant to Section 6.1(a) or (b)) permitted to be taken,
or contemplated to be taken, by such Stockholder hereunder (in his capacity as a
Stockholder) on behalf of such Stockholder (except for the approval of any
amendment of this Agreement which would require the consent of such Stockholder
pursuant to Section 8.5(b)) and (b) agrees to indemnify and hold harmless the
members of the Stockholder Representative, from time to time, and each of its
partners, shareholders, affiliates, directors, officers, fiduciaries,
Stockholders and agents (each a "Stockholder Representative Indemnitee") from
and against any and all Losses which any of them incur or suffer as a result of,
arising out of or relating to any and all actions taken or omitted to be taken
by the Stockholder Representative, except any such Losses that arise on account
of such Stockholder Representative Indemnitee's gross negligence or willful
misconduct. For purposes of this Agreement, the "Stockholder Representative"
shall initially be Celerity Circuits, LLC, The KB Mezzanine Fund II, L.P. and
Charles D. Dimick. At any time and from time to time following the Closing, a
majority in interest of the Stockholders may select replacements for the members
of the Stockholder Representative. The Stockholder Representative shall only
act, or refrain from acting, with the approval of a majority of its members.
8.3. EXPENSES.
--------
All costs and expenses, including all legal fees and expenses, incurred in
connection with each of the Documents and the transactions contemplated hereby
and thereby shall be paid by the parties as set forth on Schedule 8.3.
8.4. LEGAL COUNSEL.
-------------
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<PAGE>
By its execution below, each of the parties hereto hereby acknowledges that
he has been advised that Ropes & Gray has acted (and regularly acts) as counsel
to the Bain Funds and their affiliates (including a prospective purchaser of the
Discount Notes). In particular, each party is aware of potential conflicts
involved in the representation by Ropes & Gray of the Bain Funds and their
affiliates and confirms that (a) it has been advised to seek the advice of
independent counsel in connection with the negotiation of this Agreement, the
other Documents and the transactions contemplated hereby and thereby and (b) it
has waived and does waive any conflicts which may arise out of the
representation by Ropes & Gray of the Bain Funds and their affiliates in
connection with the negotiation of this Agreement, the other Documents and the
transactions contemplated hereby and thereby.
8.5. ENTIRE AGREEMENT; AMENDMENT.
---------------------------
(a) This Agreement, the other Documents and the Exhibits and Schedules
attached hereto and thereto, contain the entire agreement among the parties with
respect to the transactions contemplated hereby and supersede all prior
agreements and understandings among the parties with respect thereto.
(b) This Agreement shall not be altered or otherwise amended except
pursuant to an instrument in writing signed by Details Holdings, DCI and, in the
case of any such amendment which would have the effect of (i) decreasing the
consideration receivable by any Stockholder or (ii) adversely affecting the
obligations of any Stockholder under Section 6.1(c), each such Stockholder.
8.6. SEVERABILITY.
------------
It is the desire and intent of the parties hereto that the provisions of
this Agreement be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular provision of this Agreement shall be adjudicated
by a court of competent jurisdiction to be invalid, prohibited or unenforceable
for any reason, such provision, as to such jurisdiction, shall be ineffective,
without invaliding the remaining provisions of this Agreement or affecting the
validity or enforceability of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not be invalid,
prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
8.7. PUBLIC ANNOUNCEMENT.
-------------------
-42-
<PAGE>
The parties will consult with each other before issuing any press release
or otherwise making any public statements with respect to this Agreement and the
transactions contemplated hereby, and no party will issue any such press release
or any such public statement prior to such consultation and the agreement of the
other parties, except as may be required by law.
8.8. NOTICES.
-------
All notices or other communications which are required hereunder or
otherwise delivered in connection herewith shall be in writing and shall be
deemed to have been duly given if delivered personally or if sent by nationally-
recognized overnight courier, by facsimile, or by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
if to DCI, to:
Dynamic Circuits Inc.
1831 Tarob Court
Milpitas, CA 95035
Attention: Charles Dimick
Facsimile: (408) 935-9104
Telephone: (408) 263-0940
with a copy to:
McCutchen, Doyle, Brown & Enersen, LLP
3150 Porter Drive
Palo Alto, California 94304-1212
Attention: Gordon Yamate
Facsimile: (650) 849-4800
Telephone: (650) 849-4852
if to Details Holdings, to:
Details, Inc.
1231 Simon Circle
Anaheim, California 92806
Attention: Bruce McMaster
Facsimile: (714) 630-04077
Telephone: (714) 640-6933
-43-
<PAGE>
in each case with a copy to:
Bain Capital, Inc.
Two Copley Place, 7th Floor
Boston, MA 02116
Attention: David Dominik
Ed Conard
Facsimile: (617) 572-3274
Telephone: (617) 572-3000
and
Celerity Partners
11111 Santa Monica Boulevard
Suite 1127
Los Angeles, CA 90025
Attention: Stephen E. Adamson
Facsimile: (310) 268-1712
Telephone: (310) 268-1710
and
Celerity Partners
3000 Sand Hill Road
Building 4, Suite 230
Menlo Park, CA 94025
Attention: Mark R. Benham
Facsimile: (650) 233-2779
Telephone: (650) 233-8250
and
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Alfred O. Rose
Facsimile: (617) 951-7050
Telephone: (617) 951-7372
and, if to any Stockholder, to such Stockholder at the most recent
address set forth for such Stockholder in the stock records of DCI
(or, after the Closing, Details Holdings).
-44-
<PAGE>
or to such other address as any party to whom notice is to be given may have
furnished to the other parties in writing in accordance herewith. Any such
notice or communication shall be deemed to have been received (a) in the case of
personal delivery, on the date of delivery, (b) in the case of a nationally-
recognized overnight courier, day after sent, (c) in the case of facsimile
transmission, when received, and (d) in the case of mailing, on the fifth
business day following that on which the piece of mail containing such
communication is posted.
8.9. COUNTERPARTS.
------------
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute one and the same agreement.
8.10. GOVERNING LAW.
-------------
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF CALIFORNIA OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF CALIFORNIA TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA WILL CONTROL THE INTERPRETATION AND CONSTRUCTION
OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION'S CHOICE OF LAW OR CONFLICT
OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY
APPLY.
EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT,
ACTION OR PROCEEDING ARISING HEREUNDER.
8.11. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
----------------------------------------------
(a) EACH OF THE PARTIES HEREBY:
(i) FOR THE PURPOSES OF ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE OTHER DOCUMENTS OR THE SUBJECT MATTER
HEREOF OR THEREOF AND BROUGHT BY ANY OTHER PARTY, IRREVOCABLY SUBMITS TO
THE JURISDICTION OF (A) THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF CALIFORNIA (IN THE CASE OF DETAILS HOLDINGS) OR THE UNITED
STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA
-45-
<PAGE>
(IN THE CASE OF DCI AND THE STOCKHOLDERS) OR (B) SOLELY TO THE EXTENT
THAT THE ABOVE REFERENCED COURTS LACK SUBJECT MATTER JURISDICTION IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING, THE COURTS OF THE STATE OF
CALIFORNIA LOCATED IN SUCH DISTRICTS;
(ii) WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A
DEFENSE OR OTHERWISE, IN ANY SUCH ACTION OR PROCEEDING, ANY CLAIM THAT
(A) TO THE EXTENT SUCH PARTY HAS SUBMITTED TO THE JURISDICTION OF SUCH
COURT PURSUANT TO CLAUSE (i) ABOVE, IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OR SUCH COURTS, (B) THE ACTION OR PROCEEDING IS BROUGHT IN
AN INCONVENIENT FORUM OR (C) THE VENUE OF THE ACTION OR PROCEEDING IS
IMPROPER; AND
(iii) AGREES THAT, NOTWITHSTANDING ANY RIGHT OR PRIVILEGE IT MAY
POSSESS AT ANY TIME, SUCH PARTY AND ITS PROPERTY ARE AND SHALL BE
GENERALLY SUBJECT TO SUIT ON ACCOUNT OF THE OBLIGATIONS ASSUMED BY IT
HEREUNDER.
(b) EACH PARTY AGREES THAT SERVICES IN PERSON OR BY CERTIFIED OR
REGISTERED U.S. MAIL TO ITS ADDRESS SET FORTH IN SECTION 8.6 SHALL CONSTITUTE
VALID IN PERSONAM SERVICE UPON SUCH PARTY AND ITS SUCCESSORS AND ASSIGNS IN ANY
--------
ACTION OR PROCEEDING WITH RESPECT TO ANY MATTER AS TO WHICH IT HAS SUBMITTED TO
JURISDICTION HEREUNDER.
(c) EACH PARTY HEREBY ACKNOWLEDGES THAT THIS IS A COMMERCIAL
TRANSACTION, THAT THE FOREGOING PROVISIONS FOR CONSENT TO JURISDICTION AND
SERVICE OF PROCESS HAVE BEEN READ, UNDERSTOOD AND VOLUNTARILY AGREED TO BY EACH
PARTY AND THAT BY AGREEING TO SUCH PROVISIONS EACH PARTY IS WAIVING IMPORTANT
LEGAL RIGHTS.
8.12. BENEFITS OF AGREEMENT.
---------------------
All of the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Anything contained herein to the contrary
notwithstanding, this Agreement shall not be assignable by DCI or the
Stockholders without the consent of Details Holdings or by Details Holdings
without the consent of DCI; provided, however, that Details Holdings and DCI may
-------- -------
transfer part of its rights and obligations hereunder to Persons who provide
financing in connection with the transactions contemplated by this Agreement and
the other Documents;
-46-
<PAGE>
provided, further, however, that no such transfer shall relieve Details Holdings
- -------- -------
or DCI of any obligations hereunder or thereunder.
-47-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the authorized representatives of each of the parties hereto as of the date
first above written.
DETAILS HOLDINGS: Details Holdings Corp.
By /s/ Bruce D. McMaster
-----------------------------
Name: Bruce D. McMaster
Title:
DCI: Dynamic Circuits Inc.
By /s/ Charles D. Dimick
-----------------------------
Name: Charles D. Dimick
Title:
STOCKHOLDERS: Celerity Circuits, LLC
By:Celerity Dynamo, LLC
its Managing Member
By: Celerity Partners I, L.P.
its Managing Member
By: Celerity Partners, LLC
its General Partner
By /s/ Mark R. Benham
------------------------------
Name: Mark R. Benham
Title:
-48-
<PAGE>
Bain Capital Fund V, L.P.
Bain Capital Fund V-B, L.P.
By: Bain Capital Partners V, L.P.,
their general partner
By: Bain Capital Investors V, Inc.,
its general partner
By /s/ David Dominik
-------------------------------
Name: David Dominik
Title: Managing Director
BCIP Associates
BCIP Trust Associates, L.P.
By /s/ David Dominik
-------------------------------
Name: David Dominik
Title: a general partner
Churchill ESOP Capital Partners,
A Minnesota Limited Partnership
By: Churchill Capital Investment Partners,
its general partner
By: Churchill Capital, Inc.,
its general partner
By /s/ David Wakefield
-----------------------------
Name: David Wakefield
Title:
-49-
<PAGE>
The KB Mezzanine Fund, II, L.P.
By: EIP Capital Partners, L.P.
its general partner
By: Equinox Investment Partners, L.L.C.
its general partner
By /s/ Jonathan C. Stearns
--------------------------------
Name: Jonathan C. Steans
Title: Managing Member
Indosuez DCI Partners
By:Indosuez CM II, Inc.,
its managing general partner
By [SIGNATURE APPEARS HERE]
--------------------------------
Name:
Title:
By /s/ Matthew Linett
--------------------------------
Name: Matthew Linett
Title:
/s/ Charles D. Dimick
-----------------------------
Charles D. Dimick
-----------------------------
[Spouse]
/s/ John Peters
-----------------------------
John Peters
/s/ Teresa Peters
-----------------------------
Teresa Peters
-50-
<PAGE>
/s/ Larry Peiper
-----------------------------
Larry Peiper
/s/ Melanie Peiper
-----------------------------
Melanie Peiper
Jaech/Seymour 1982 Family Trust
/s/ Ron Jaech
By----------------------------
Name: Ron Jaech
Title:
/s/ Joanna Seymour
By---------------------------
Name: Joanna Seymour
Title:
/s/ Gary Sullivan
-----------------------------
Gary Sullivan
/s/ Jill Sullivan
-----------------------------
[Spouse]
-51-
<PAGE>
/s/ Thomas P. Caldwell
_____________________________
Thomas P. Caldwell
/s/ Stepanie J. Caldwell
_____________________________
[Spouse]
/s/ Eric Naroian
_____________________________
Eric Naroian
/s/ Karen Naroian
_____________________________
[Spouse]
/s/ Ronald Ryno
_____________________________
Ronald Ryno
/s/ Andrea Ryno
_____________________________
[Spouse]
/s/ Jeffrey Ryno
_____________________________
Jeffrey Ryno
/s/ Valerie Ryno
_____________________________
[Spouse]
/s/ Vernon Morgan
_____________________________
Vernon Morgan
/s/ Ruth Morgan
_____________________________
[Spouse]
-52-
<PAGE>
/s/ Dick Galatian
-----------------------------
Dick Galatian
/s/ Barbara Galatian
-----------------------------
[Spouse]
-53-
<PAGE>
SCHEDULE 1.5
------------
Deliveries
----------
-54-
<PAGE>
SCHEDULE 4.2
------------
Contracts to be Terminated
--------------------------
1. 1996 Stock Option Plan
2. 1997 Stock Option Plan
3. DCI Stockholders Agreement
4. Management Agreement among DCI, Celerity and Bain
-55-
<PAGE>
SCHEDULE 5.1
------------
Documents
---------
1. Details Holdings Stockholders Agreement
2. Employment Agreements
3. Option Agreements
4. Non-Compete and Technology Transfer Agreements dated as of July 23, 1998
between Details Holdings and each of Charles Dimick, John Peters, Greg
Halvorson and Eric Naroian.
-56-
<PAGE>
Exhibit 2.2
August 5, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
Reference is made to the Stock Contribution and Merger Agreement dated as
of July 23, 1998, (the "Merger Agreement"), by and among Details Holdings Corp.,
a California corporation and the indirect parent of the Registrants, Dynamic
Circuits Inc., a Delaware corporation, and the stockholders of Dynamic Circuits
Inc., which is an exhibit to the Registrant's Current Report on Form 8-K (the
"Current Report") filed today with the Securities and Exchange Commission (the
"Commission"). The Registrants hereby agree to furnish to the Commission, upon
request, a copy of any annex, schedule or exhibit to the Merger Agreement
omitted from the copy of such agreement filed as an exhibit to the Current
Report.
Very truly yours,
DETAILS CAPITAL CORP.
DETAILS, INC.
By: /s/ Bruce D. McMaster
-----------------------------
Name: Bruce D. McMaster
Title: President
<PAGE>
DETAILS CAPITAL CORP.
DETAILS, INC.
DYNAMIC CIRCUITS, INC.
__________________________________
CREDIT AGREEMENT
_________________
dated as of
July 23, 1998
__________________________________
BANKERS TRUST COMPANY,
as Documentation and Co-Syndication Agent
THE CHASE MANHATTAN BANK,
as Collateral, Co-Syndication and Administrative Agent
____________________________
[LOGO OF CHASE APPEARS HERE]
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS............................................................. 1
1.1 Defined Terms............................................................. 1
1.2 Other Definitional Provisions............................................. 22
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS......................................... 23
2.1 Term Loan Commitments..................................................... 23
2.2 Procedure for Term Loan Borrowing......................................... 23
2.3 Repayment of Term Loans................................................... 23
2.4 Revolving Credit Commitments.............................................. 25
2.5 Procedure for Revolving Credit Borrowing.................................. 25
2.6 Swing Line Commitment..................................................... 26
2.7 Procedure for Swing Line Borrowing; Refunding of Swing Line Loans......... 26
2.8 Commitment Fees, etc...................................................... 27
2.9 Termination or Reduction of Commitments................................... 28
2.10 Optional Prepayments..................................................... 28
2.11 Mandatory Prepayments and Commitment Reductions.......................... 28
2.12 Conversion and Continuation Options...................................... 30
2.13 Minimum Amounts and Maximum Number of Eurodollar Tranches................ 30
2.14 Interest Rates and Payment Dates......................................... 30
2.15 Computation of Interest and Fees......................................... 31
2.16 Inability to Determine Interest Rate..................................... 31
2.17 Pro Rata Treatment and Payments.......................................... 32
2.18 Requirements of Law...................................................... 33
2.19 Taxes.................................................................... 34
2.20 Indemnity................................................................ 36
2.21 Change of Lending Office................................................. 36
2.22 Replacement of Lenders under Certain Circumstances....................... 37
SECTION 3. LETTERS OF CREDIT....................................................... 37
3.1 L/C Commitment............................................................ 37
3.2 Procedure for Issuance of Letter of Credit................................ 37
3.3 Commissions, Fees and Other Charges....................................... 38
3.4 L/C Participations........................................................ 38
3.5 Reimbursement Obligation of the Borrowers................................. 39
3.6 Obligations Absolute...................................................... 39
3.7 Letter of Credit Payments................................................. 40
3.8 Applications.............................................................. 40
SECTION 4. REPRESENTATIONS AND WARRANTIES.......................................... 40
4.1 Financial Condition....................................................... 40
4.2 No Change................................................................. 41
4.3 Corporate Existence; Compliance with Law.................................. 41
4.4 Corporate Power; Authorization; Enforceable Obligations................... 41
4.5 No Legal Bar.............................................................. 42
4.6 No Material Litigation.................................................... 42
4.7 No Default................................................................ 42
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.8 Ownership of Property; Liens.................................................. 42
4.9 Intellectual Property......................................................... 42
4.10 Taxes........................................................................ 43
4.11 Federal Regulations.......................................................... 43
4.12 Labor Matters................................................................ 43
4.13 ERISA........................................................................ 43
4.14 Investment Company Act; Other Regulations.................................... 44
4.15 Subsidiaries................................................................. 44
4.16 Use of Proceeds.............................................................. 44
4.17 Environmental Matters........................................................ 44
4.18 Accuracy of Information, etc................................................. 45
4.19 Security Documents........................................................... 45
4.20 Solvency..................................................................... 46
4.21 Senior Indebtedness.......................................................... 46
4.22 Regulation H................................................................. 46
4.23 Year 2000 Matters............................................................ 46
4.24 Senior Indebtedness.......................................................... 47
SECTION 5. CONDITIONS PRECEDENT........................................................ 47
5.1 Conditions to Initial Extension of Credit..................................... 47
5.2 Condition to Loans on the Second Closing Date................................. 50
5.3 Conditions to Each Extension of Credit........................................ 50
SECTION 6. AFFIRMATIVE COVENANTS....................................................... 50
6.1 Financial Statements.......................................................... 51
6.2 Certificates; Other Information............................................... 51
6.3 Payment of Obligations........................................................ 53
6.4 Conduct of Business and Maintenance of Existence, etc......................... 53
6.5 Maintenance of Property; Insurance............................................ 53
6.6 Inspection of Property; Books and Records; Discussions........................ 53
6.7 Notices....................................................................... 53
6.8 Environmental Laws............................................................ 54
6.9 Interest Rate Protection...................................................... 54
6.10 Additional Collateral, etc................................................... 54
6.11 DCI Drop Down................................................................ 56
SECTION 7. NEGATIVE COVENANTS.......................................................... 57
7.1 Financial Condition Covenants................................................. 57
7.2 Limitation on Indebtedness.................................................... 58
7.3 Limitation on Liens........................................................... 59
7.4 Limitation on Fundamental Changes............................................. 60
7.5 Limitation on Sale of Assets.................................................. 61
7.6 Limitation on Dividends....................................................... 61
7.7 Limitation on Capital Expenditures............................................ 62
7.8 Limitation on Investments, Loans and Advances................................. 63
7.9 Limitation on Optional Payments and Modifications of Debt Instruments, etc.... 64
7.10 Limitation on Transactions with Affiliates................................... 65
7.11 Limitation on Sales and Leasebacks........................................... 65
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
7.12 Limitation on Changes in Fiscal Periods...................................... 65
7.13 Limitation on Negative Pledge Clauses........................................ 65
7.14 Limitation on Restrictions on Subsidiary Distributions....................... 66
7.15 Limitation on Lines of Business.............................................. 66
7.16 Limitation on Amendments to Transaction Documents............................ 66
7.17 Limitation on Activities of the Company...................................... 66
SECTION 8. EVENTS OF DEFAULT........................................................... 66
SECTION 9. THE ADMINISTRATIVE AGENT.................................................... 70
9.1 Appointment................................................................... 70
9.2 Delegation of Duties.......................................................... 70
9.3 Exculpatory Provisions........................................................ 70
9.4 Reliance by Administrative Agent.............................................. 71
9.5 Notice of Default............................................................. 71
9.6 Non-Reliance on Agents and Other Lenders...................................... 71
9.7 Indemnification............................................................... 72
9.8 Administrative Agent in Its Individual Capacity............................... 72
9.9 Successor Administrative Agent................................................ 73
9.10 Authorization to Release Liens............................................... 73
SECTION 10. GUARANTEE.................................................................. 73
10.1 Guarantee.................................................................... 73
10.2 No Subrogation, Contribution, Reimbursement or Indemnity..................... 74
10.3 Amendments, etc. with respect to the DCI Obligations......................... 74
10.4 Guarantee Absolute and Unconditional......................................... 75
10.5 Reinstatement................................................................ 75
10.6 Payments..................................................................... 75
SECTION 11. MISCELLANEOUS.............................................................. 75
11.1 Amendments and Waivers....................................................... 75
11.2 Notices...................................................................... 76
11.3 No Waiver; Cumulative Remedies............................................... 77
11.4 Survival of Representations and Warranties................................... 78
11.5 Payment of Expenses and Taxes................................................ 78
11.6 Successors and Assigns; Participations and Assignments....................... 78
11.7 Adjustments; Set-off......................................................... 81
11.8 Counterparts................................................................. 82
11.9 Severability................................................................. 82
11.10 Integration................................................................. 82
11.11 GOVERNING LAW............................................................... 82
11.12 Submission To Jurisdiction; Waivers......................................... 82
11.13 Acknowledgements............................................................ 83
11.14 WAIVERS OF JURY TRIAL....................................................... 83
11.15 Confidentiality............................................................. 83
</TABLE>
-iii-
<PAGE>
SCHEDULES
--------------------------------------------
Schedule 1.1A Commitments
Schedule 1.1B Mortgaged Property
Schedule 4.4 Consents, Authorizations, Filings and Notices
Schedule 4.10 Taxes
Schedule 4.15 Subsidiaries
Schedule 4.19(a) UCC Filing Jurisdictions
Schedule 4.19(b) Mortgage Filing Jurisdictions
Schedule 7.2(e) Existing Indebtedness
Schedule 7.3(e) Existing Liens
EXHIBITS
--------------------------------------------
Exhibit A Form of Guarantee and Collateral Agreement
Exhibit B Form of Compliance Certificate
Exhibit C Form of Closing Certificate
Exhibit D Form of Assignment and Acceptance
Exhibit E Form of Legal Opinion of Ropes & Gray
Exhibit F-1 Form of Term Note
Exhibit F-2 Form of Revolving Credit Note
Exhibit F-3 Form of Alternative Term Note
Exhibit F-4 Form of Alternative Revolving Credit Note
Exhibit F-5 Form of Swing Line Note
Exhibit G Form of Prepayment Option Notice
Exhibit H Form of Mortgage
-iv-
<PAGE>
CREDIT AGREEMENT, dated as of July 23, 1998, among DETAILS CAPITAL
CORP., a California corporation (the "Company"), DETAILS, INC., a California
-------
corporation ("Details"), DYNAMIC CIRCUITS, INC., a Delaware corporation ("DCI",
------- ---
and collectively with Details, the "Borrowers", and individually, a "Borrower"),
--------- --------
the several banks and other financial institutions or entities from time to time
parties to this Agreement (the "Lenders"), BANKERS TRUST COMPANY, as
-------
documentation and co-syndication agent, and THE CHASE MANHATTAN BANK, as
collateral, co-syndication and administrative agent.
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms listed in
-------------
this Section 1.1 shall have the respective meanings set forth in this Section
1.1.
"ABR": for any day, a rate per annum (rounded upwards, if necessary,
---
to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in effect on
such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2
of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest per
----------
annum publicly announced from time to time by the Administrative Agent as its
prime rate in effect at its principal office in New York City (the Prime Rate
not being intended to be the lowest rate of interest charged by the
Administrative Agent in connection with extensions of credit to debtors); and
"Federal Funds Effective Rate" shall mean, for any day, the weighted average of
- -----------------------------
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Administrative Agent
from three federal funds brokers of recognized standing selected by it. Any
change in the ABR due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective as of the opening of business on the effective
day of such change in the Prime Rate or the Federal Funds Effective Rate,
respectively.
"ABR Loans": Loans the rate of interest applicable to which is based
---------
upon the ABR.
"Accepting Lenders": as defined in Section 2.17(d).
-----------------
"Adjustment Date": as defined in the Pricing Grid.
---------------
"Administrative Agent": The Chase Manhattan Bank, together with its
--------------------
affiliates, as the arranger of the Commitments and as the collateral, co-
syndication and administrative agent for the Lenders under this Agreement and
the other Loan Documents, together with any of its successors.
"Affiliate": as to any Person, any other Person which, directly or
---------
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either to (a) vote 10% or more of the securities
having ordinary voting power for the election of directors (or persons
performing similar functions) of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise. In addition, for the purpose of this Agreement, an Affiliate of Bain
Capital shall include any Bain Investor or any investment fund under common
control with the Bain Investors. Notwithstanding the foregoing, none of the
Lenders or any of their respective affiliates shall be deemed to be Affiliates
of the Company or its Subsidiaries.
<PAGE>
"Agreement": this Credit Agreement, as amended, supplemented or
---------
otherwise modified from time to time.
"AHYDO Payment": the payment of $427.16 for each $1,000 of accreted
-------------
principal amount of the New Intermediate Holdco Notes on December 31, 2003.
"Alternative Note": as defined in Section 11.6(f)(ii).
----------------
"Alternative Noteholder": as defined in Section 11.6(f)(ii).
----------------------
"Applicable Margin": for each Type of Loan, the rate per annum set
-----------------
forth under the relevant column heading below:
Eurodollar
ABR Loans Loans
--------- ----------
Revolving Credit Loans and
Swing Line Loans 1.25% 2.25%
Tranche A Term Loans 1.25% 2.25%
Tranche B Term Loans 1.50% 2.50%
; provided, that on and after the first Adjustment Date occurring after the
--------
completion of two full fiscal quarters of Details after the Closing Date, the
Applicable Margin with respect to Revolving Credit Loans, the Swing Line Loans,
and Tranche A Term Loans will be determined pursuant to the Pricing Grid.
"Application": an application, in such form as the Issuing Lender may
-----------
specify from time to time, requesting the Issuing Lender to open a Letter of
Credit.
"Approved Fund": with respect to any Lender that is a fund that
-------------
invests in commercial loans, any other fund that invests in commercial loans and
is managed by the same investment advisor as such Lender or by an Affiliate of
such investment advisor.
"Asset Sale": any Disposition of Property or series of related
----------
Dispositions of Property (excluding any such Disposition permitted by clause
(a), (b), (c), (d) or (e) of Section 7.5) which yields gross proceeds to the
Company or any of its Subsidiaries (valued at the initial principal amount
thereof in the case of non-cash proceeds consisting of notes or other debt
securities and valued at fair market value in the case of other non-cash
proceeds) in excess of $500,000.
"Assignee": as defined in Section 11.6(c).
--------
"Assignor": as defined in Section 11.6(c).
--------
"Available Revolving Credit Commitment": as to any Revolving Credit
-------------------------------------
Lender at any time, an amount equal to the excess, if any, of (a) such Lender's
Revolving Credit Commitment over (b) such Lender's Revolving Extensions of
----
Credit.
-2-
<PAGE>
"Bain Affiliates": any Bain Investor or Affiliate of Bain Capital,
---------------
provided that, for purposes of the definition of "Change of Control", the term
- --------
Bain Affiliate shall not include (x) any portfolio company of either Bain
Capital or any Affiliate of Bain Capital or (y) any officer or director of the
Company or any of its Subsidiaries that is not also a partner, principal or
stockholder of Bain Capital.
"Bain Capital": Bain Capital, Inc., a Delaware
------------
corporation.
"Bain Investor": Bain Capital Fund V, L.P., Bain Capital Fund V-B,
-------------
L.P., BCIP Associates, BCIP Trust Associates, L.P and RGIP, LLC.
"Base CapEx Amount": as defined in Section 7.7.
-----------------
"Board": the Board of Governors of the Federal Reserve
-----
System of the United States (or any successor).
"Borrower" or "Borrowers": as defined in the preamble.
-------- ---------
"Borrowing Date": any Business Day specified by the relevant Borrower
--------------
as a date on which such Borrower requests the relevant Lenders to make Loans
hereunder.
"Business": as defined in Section 4.17.
--------
"Business Day": (i) for all purposes other than as covered by cause
------------
(ii) below, a day other than a Saturday, Sunday or other day on which commercial
banks in New York City are authorized or required by law to close and (ii) with
respect to all notices and determinations in connection with, and payments of
principal and interest on, Eurodollar Loans, any day which is a Business Day
described in clause (i) and which is also a day for trading by and between banks
in Dollar deposits in the interbank eurodollar market.
"Capital Expenditures": for any period, with respect to any Person,
--------------------
the aggregate of all expenditures (other than expenditures constituting an
investment described in Section 7.8(i)) by such Person and its Subsidiaries for
the acquisition or leasing (pursuant to a capital lease) of fixed or capital
assets or additions to equipment (including replacements, capitalized repairs
and improvements during such period) which should be capitalized under GAAP on a
consolidated balance sheet of such Person and its Subsidiaries.
"Capital Lease Obligations": as to any Person, the obligations of
-------------------------
such Person under any lease of (or other arrangement conveying the right to use)
real or personal property, or a combination thereof, which are required to be
classified and accounted for as capital leases on a balance sheet of such Person
under GAAP and, for the purposes of this Agreement, the amount of such
obligations at any time shall be the capitalized amount thereof at such time
determined in accordance with GAAP.
"Capital Stock": any and all shares, interests, participations or
-------------
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a
-3-
<PAGE>
Person (other than a corporation) and any and all warrants, rights or options to
purchase any of the foregoing.
"Cash Equivalents": (a) marketable direct obligations issued by, or
----------------
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition; (b)
certificates of deposit, time deposits, eurodollar time deposits or overnight
bank deposits having maturities of one year or less from the date of acquisition
issued by any Lender or by any commercial bank organized under the laws of the
United States of America or any state thereof having combined capital and
surplus of not less than $500,000,000; (c) commercial paper of an issuer rated
at least A-2 by Standard & Poor's Ratings Services or P-2 by Moody's Investors
Service, Inc., or carrying an equivalent rating by a nationally recognized
rating agency, if both of the two named rating agencies cease publishing ratings
of commercial paper issuers generally, and maturing within one year from the
date of acquisition; (d) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, rated at least A-2 by
Standard & Poor's Ratings Services or P-2 by Moody's Investors Service, Inc.;
and (e) investments in money market funds substantially all the assets of which
are comprised of securities of the types described in clauses (a) through (d)
above.
"Change of Control": any of the following events:
-----------------
(a) prior to the date of an initial registered public offering by Holdings of
its common stock, (i) Bain Capital and Bain Affiliates shall cease to own
(on a fully diluted basis) at least 15% of the economic and voting
interests in the Capital Stock of Holdings or (ii) the Permitted Holders
shall cease to "control" (as such term is defined in Rule 405 promulgated
under the Securities Act of 1933, as amended) Holdings; or
(b) from and after the date of an initial registered public offering by
Holdings of its common stock, (i) any Person or "group" (within the meaning
of Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in
effect on the Closing Date) shall own a greater percentage of the voting
and/or economic interest in the Capital Stock of Holdings than that owned
by Bain Capital and/or the Bain Affiliates or (ii) the Board of Directors
of Holdings shall cease to consist of a majority of Continuing Directors.
"Closing Date": the date on which the conditions precedent set forth
------------
in Section 5.1 shall have been satisfied, which date shall be no later than
August 20, 1998.
"Code": the Internal Revenue Code of 1986, as amended from time to
----
time.
"Collateral": all Property of the Loan Parties, now owned or
----------
hereafter acquired, upon which a Lien is purported to be created by any Security
Document.
"Colorado Springs Acquisition": the acquisition by Details of all of
----------------------------
the Capital Stock of Colorado Springs Circuits, Inc.
-4-
<PAGE>
"Commitment": as to any Lender, the sum of the Tranche A Term Loan
----------
Commitment, the Tranche B Term Loan Commitment and the Revolving Credit
Commitment of such Lender.
"Commitment Fee Rate": 1/2 of 1% per annum; provided, that on and
------------------- --------
after the first Adjustment Date occurring after the completion of two full
fiscal quarters of Details after the Closing Date, the Commitment Fee Rate will
be determined pursuant to the Pricing Grid.
"Commonly Controlled Entity": an entity, whether or not incorporated,
--------------------------
which is under common control with Details within the meaning of Section 4001 of
ERISA or is part of a group which includes Details and which is treated as a
single employer under Section 414 of the Code.
"Company": as defined in the preamble.
-------
"Company Indenture": the Indenture, dated as of November 18, 1997,
-----------------
entered into by Holdings and subsequently assumed by the Company in connection
with the issuance of the Company Zeros, together with all instruments and other
agreements entered into by Holdings and subsequently contributed to the Company
or any of its Subsidiaries in connection therewith, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with Section
7.9.
"Company Zeros": the senior unsecured discount notes of the Company
-------------
issued pursuant to the Company Indenture.
"Compliance Certificate": a certificate duly executed by a
----------------------
Responsible Officer substantially in the form of Exhibit B.
"Confidential Information Memorandum": the Confidential Information
-----------------------------------
Memorandum dated July 1998 prepared by Details with respect to the Facilities.
"Consolidated Current Assets": at a particular date, all amounts
---------------------------
(other than cash and Cash Equivalents) which would, in conformity with GAAP, be
set forth opposite the caption "total current assets" (or any like caption) on a
consolidated balance sheet of Details and its Subsidiaries at such date.
"Consolidated Current Liabilities": at a particular date, all amounts
--------------------------------
which would, in conformity with GAAP, be set forth opposite the caption "total
current liabilities" (or any like caption) on a consolidated balance sheet of
Details and its Subsidiaries at such date, but excluding (a) the current portion
of any Funded Debt of Details and its Subsidiaries, (b) without duplication of
clause (a) above, all Indebtedness consisting of Revolving Credit Loans to the
extent otherwise included therein and (c) the current portion of the Deferred
Payment Amounts.
"Consolidated EBITDA": for any period, Consolidated Net Income for
-------------------
such period plus, (a) without duplication and to the extent reflected as a
----
charge in the statement of such Consolidated Net Income for such period, the sum
of (i) total income tax expense, (ii) total interest expense, amortization or
writeoff of debt discount and debt issuance costs and commissions, discounts and
other fees and charges associated with Indebtedness (including the Loans), (iii)
depreciation and
-5-
<PAGE>
amortization expense, (iv) amortization of intangibles (including, but not
limited to, goodwill) and organization costs, (v) any extraordinary or non-
recurring expenses or losses (including, whether or not otherwise includable as
a separate item in the statement of such Consolidated Net Income for such
period, losses on sales of assets outside of the ordinary course of business),
(vi) charges for the write-off of any step-up in basis in inventory required in
a transaction which is accounted for under the purchase method of accounting,
(vii) any other non-cash charges and (viii) all management fees paid to Bain
Capital and the Bain Affiliates permitted by Section 7.10, minus, (b) to the
-----
extent included in the statement of such Consolidated Net Income for such
period, the sum of (i) interest income, (ii) any extraordinary or non-recurring
income or gains (including, whether or not otherwise includable as a separate
item in the statement of such Consolidated Net Income for such period, gains on
the sales of assets outside of the ordinary course of business) and (iii) any
other non-cash income (other than non-cash income resulting from Details'
accrual method of accounting in accordance with past practice); provided that,
--------
for purposes of determining Consolidated EBITDA at a time when less than four
full fiscal quarters of Details have begun after and fully elapsed since the
Closing Date, Consolidated EBITDA for the relevant period shall be deemed to be
the sum of (x) the aggregate Consolidated EBITDA of Details for those fiscal
quarters which have begun after and fully elapsed since the Closing Date and (y)
the aggregate Consolidated EBITDA (determined on a pro forma basis, as if the
Four Transactions had occurred on the day immediately prior to the first day of
such period) of Details for the requisite number of consecutive fiscal quarters
commencing prior to the Closing Date. Notwithstanding the foregoing, there shall
be added to Consolidated EBITDA on a pro forma basis for purposes of computing
--- -----
the financial covenants for any period set forth in Section 7.1 (i) the amount
of compensation and other payments paid to James I. Swenson (not to exceed
$2,400,000) which were deducted in computing Consolidated Net Income for such
period and (ii) the expenses deducted in computing Consolidated Net Income for
such period which were associated with the vesting and exercise by existing
management of Holdings of options on the Capital Stock of Holdings on or prior
to the Closing Date and the bonuses paid to such existing management pursuant to
Section 1.11 of the Recapitalization Agreement.
"Consolidated Fixed Charge Coverage Ratio": for any period, the ratio
----------------------------------------
of (a) the total of (i) Consolidated EBITDA for such period less (ii) the
aggregate amount actually paid by Details and its Subsidiaries in cash during
such period on account of Capital Expenditures (excluding the principal amount
of Indebtedness incurred in connection with such expenditures and any Capital
Expenditures financed with Reinvestment Deferred Amounts) less (iii) any
provision for cash income taxes made by Details and its Subsidiaries on a
consolidated basis in respect of such period to (b) Consolidated Fixed Charges
for such period.
"Consolidated Fixed Charges": for any period, the sum (without
--------------------------
duplication) of (a) Consolidated Interest Expense for such period and (b)
scheduled payments made during such period on account of principal of
Indebtedness of Details or any of its Subsidiaries (including the Term Loans).
"Consolidated Interest Coverage Ratio": for any period, the ratio of
------------------------------------
(a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for
such period.
"Consolidated Interest Expense": for any period, all cash interest
-----------------------------
expense (including that attributable to Capital Lease Obligations) of New
Intermediate Holdco and its Subsidiaries for such period with respect to all
outstanding Indebtedness of New Intermediate Holdco and its
-6-
<PAGE>
Subsidiaries (including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Protection Agreements to
the extent such net costs are allocable to such period in accordance with GAAP)
but shall exclude the amount of the AHYDO Payment; provided that, for purposes
--------
of determining Consolidated Interest Expense at a time when less than four full
fiscal quarters of New Intermediate Holdco have begun after and fully elapsed
since the Closing Date, Consolidated Interest Expense shall be determined by
annualizing the Consolidated Interest Expense of New Intermediate Holdco for
those fiscal quarters which have begun after and fully elapsed since the Closing
Date.
"Consolidated Leverage Ratio": as at the last day of any period, the
---------------------------
ratio of (a) Consolidated Total Debt on such day to (b) Consolidated EBITDA for
such period.
"Consolidated Net Income": for any period, the consolidated net
-----------------------
income (or loss) of Details and its Subsidiaries, determined on a consolidated
basis in accordance with GAAP; provided that there shall be excluded therefrom
--------
(a) the income (or deficit) of any Person accrued prior to the date it becomes a
Subsidiary of Details or is merged into or consolidated with Details or any of
its Subsidiaries, (b) the income (or deficit) of any Person (other than a
Subsidiary of Details) in which Details or any of its Subsidiaries has an
ownership interest, except to the extent that any such income is actually
received by Details or such Subsidiary in the form of dividends or similar
distributions and (c) the undistributed earnings of any Subsidiary of Details to
the extent that the declaration or payment of dividends or similar distributions
by such Subsidiary is not at the time permitted by the terms of any Contractual
Obligation (other than under any Loan Document) or Requirement of Law applicable
to such Subsidiary.
"Consolidated Total Debt": at any date, the aggregate principal
-----------------------
amount of all Indebtedness of Details and its Subsidiaries at such date,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Working Capital": the excess of Consolidated Current
----------------------------
Assets over Consolidated Current Liabilities.
"Continuing Directors": the directors of Holdings on the date of
--------------------
Holdings' initial registered public offering of its common stock and each other
director if such director's nomination for the election to the Board of
Directors of Holdings is recommended by a majority of the then Continuing
Directors.
"Contractual Obligation": as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
Property is bound.
"Cuplex Acquisition": the acquisition by DCI of all of the Capital
------------------
Stock of Cuplex, Inc.
"DCI": as defined in the preamble.
---
"DCI Obligations": the unpaid principal of and interest on
---------------
(including, without limitation, interest accruing after the maturity of the
Loans made to DCI and the Reimbursement
-7-
<PAGE>
Obligations of DCI and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to DCI, whether or not a claim for post-filing or post-
petition interest is allowed in such proceeding) the Loans made to DCI and all
other obligations and liabilities of DCI to the Administrative Agent or to any
Lender (or, in the case of Interest Rate Protection Agreements, any affiliate of
any Lender), whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with, this Agreement, any other Loan Document, the Letters
of Credit, any Interest Rate Protection Agreement entered into with any Lender
or any affiliate of any Lender or any other document made, delivered or given in
connection herewith or therewith, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses (including,
without limitation, all fees, charges and disbursements of counsel to the
Administrative Agent or to any Lender that are required to be paid by DCI
pursuant hereto) or otherwise.
"DCI Preferred Stock": as defined in Section 5.1(b)(iv).
-------------------
"Default": any of the events specified in Section 8, whether or not
-------
any requirement for the giving of notice, the lapse of time, or both, has been
satisfied.
"Deferred Payment Amount: all amounts payable to holders of options
-----------------------
to purchase DCI stock under the employment agreements and option agreements
dated July 23, 1998 between Holdings, DCI and such option holders, not in excess
of $9,000,000 in the aggregate.
"Designated Equity Amounts": at any date, the amount equal to the
-------------------------
aggregate amount of Net Cash Proceeds received by Holdings and its Subsidiaries
from the issuance of Capital Stock which (a) have been contributed to a
Borrower, (b) have been designated in writing by the Borrower to the
Administrative Agent as "Permitted Expenditure Amounts" and (c) are utilized by
the Borrower and its Subsidiaries within 45 days after such receipt for an
Expenditure Use Amount.
"Disposition": with respect to any Property, any sale, lease, sale
-----------
and leaseback, assignment, conveyance, transfer or other disposition thereof;
and the terms "Dispose" and "Disposed of" shall have correlative meanings.
------- -----------
"Dollars" and "$": dollars in lawful currency of the United States of
------- -
America.
"Domestic Subsidiary": any Subsidiary of Details organized under the
-------------------
laws of any jurisdiction within the United States of America.
"ECF Percentage": 75%; provided, that, with respect to each fiscal
-------------- --------
year of Details ending on or after December 31, 2000, the ECF Percentage shall
be reduced to 50% if the Consolidated Leverage Ratio as of the last day of such
fiscal year is not greater than 4.0 to 1.0.
"Environmental Laws": any and all foreign, Federal, state, local or
------------------
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.
-8-
<PAGE>
"ERISA": the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
---------------------------------
Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal fraction) of reserve requirements in effect on such day
(including, without limitation, basic, supplemental, marginal and emergency
reserves under any regulations of the Board or other Governmental Authority
having jurisdiction with respect thereto) dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of the Board) maintained by a member bank of the
Federal Reserve System.
"Eurodollar Base Rate": with respect to each day during each Interest
--------------------
Period pertaining to a Eurodollar Loan, the rate per annum determined by the
Administrative Agent to be the offered rate for deposits in Dollars with a term
comparable to such Interest Period that appears on the applicable Telerate Page
at approximately 10:00 A.M., New York City time, two Business Days prior to the
beginning of such Interest Period; provided, however, that if at any time for
-------- -------
any reason such offered rate does not appear on the applicable Telerate Page,
"Eurodollar Base Rate" shall mean, with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum equal to the rate at
which the Administrative Agent is offered Dollar deposits at or about 10:00
A.M., New York City time, two Business Days prior to the beginning of such
Interest Period in the interbank eurodollar market where the eurodollar and
foreign currency and exchange operations in respect of its Eurodollar Loans are
then being conducted for delivery on the first day of such Interest Period for
the number of days comprised therein and in an amount comparable to the amount
of its Eurodollar Loans to be outstanding during such Interest Period.
"Eurodollar Loans": Loans the rate of interest applicable to which is
----------------
based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
---------------
Period pertaining to a Eurodollar Loan, a rate per annum determined for such day
in accordance with the following formula (rounded upward to the nearest 1/100th
of 1%):
Eurodollar Base Rate
-------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to Eurodollar Loans
------------------
the then current Interest Periods with respect to all of which begin on the same
date and end on the same later date (whether or not such Loans shall originally
have been made on the same day).
"Event of Default": any of the events specified in Section 8,
----------------
provided that any requirement for the giving of notice, the lapse of time, or
- --------
both, has been satisfied.
"Excess Cash Flow": for any fiscal year of Details, the excess, if
----------------
any, of (a) the sum, without duplication, of (i) Consolidated Net Income for
such fiscal year, (ii) an amount equal to the amount of all non-cash charges
deducted in arriving at such Consolidated Net Income, (iii) decreases in
Consolidated Working Capital for such fiscal year, (iv) an amount equal to the
aggregate net non-cash loss on the Disposition of Property by Details and its
Subsidiaries during such fiscal year (other than
-9-
<PAGE>
sales of inventory in the ordinary course of business), to the extent deducted
in arriving at such Consolidated Net Income, (v) the amount, if any, by which
Consolidated Working Capital was increased by changes in the current deferred
income tax account and (vi) the amount by which Consolidated Working Capital was
increased as a result of the payment in such fiscal year of items referred to in
clause (b)(vii) below over (b) the sum, without duplication, of (i) an amount
----
equal to the amount of all non-cash credits included in arriving at such
Consolidated Net Income, (ii) the aggregate amount actually paid by Details and
its Subsidiaries in cash during such fiscal year on account of Capital
Expenditures (excluding the principal amount of Indebtedness incurred in
connection with such expenditures and any such expenditures financed with the
proceeds of any portion of the Reinvestment Deferred Amount that exceeded any
gain recognized as a result of the event that gave rise to such Deferred
Investment Amount), (iii) the aggregate amount of all prepayments of Revolving
Credit Loans and Swing Line Loans during such fiscal year to the extent
accompanying permanent optional reductions of the Revolving Credit Commitments
and all optional prepayments of the Term Loans during such fiscal year, (iv) the
aggregate amount of all principal payments of Funded Debt (including, without
limitation, the Term Loans) of Details and its Subsidiaries made during such
fiscal year (other than in respect of any revolving credit facility to the
extent there is not an equivalent permanent reduction in commitments
thereunder), (v) increases in Consolidated Working Capital for such fiscal year,
(vi) an amount equal to the aggregate net non-cash gain on the Disposition of
Property by Details and its Subsidiaries during such fiscal year (other than
sales of inventory in the ordinary course of business), to the extent included
in arriving at such Consolidated Net Income, (vii) the amount of non cash
charges that decreased Consolidated Working Capital during such fiscal year
which resulted from items that Details reasonably determines in good faith are
expected to be paid in cash in the immediately following fiscal year, (viii) any
cash disbursement made against non-current liabilities to the extent not
deducted in determining Consolidated Net Income, (ix) the amount, if any, by
which Consolidated Working Capital was decreased by changes in the current
deferred income tax account, (x) the amount of distributions permitted by
Section 7.6 which were made in such fiscal year, (xi) the amount of investments,
advances, loans or extensions of credit made pursuant to clauses (d), (e), (i)
and (j) of Section 7.8, to the extent not funded by the incurrence of
Indebtedness or contributions to capital, (xii) any payments made to the former
shareholders of Holdings pursuant to Section 1.11 of the Recapitalization
Agreement and (xiii) any payments made during such fiscal year in respect of
Deferred Payment Amounts. As used in the foregoing definition of "Excess Cash
Flow", the term fiscal year shall be deemed to include any other specified
period for which Excess Cash Flow is being measured.
"Excess Cash Flow Application Date": as defined in Section 2.11(c).
---------------------------------
"Excluded Foreign Subsidiaries": any Foreign Subsidiary the pledge of
-----------------------------
all of whose Capital Stock as Collateral would, in the good faith judgment of
Details, result in adverse tax consequences to Details.
"Expenditure Use Amounts": at any date, the amount equal to the sum
-----------------------
of (a) all amounts utilized by Details and its Subsidiaries to finance Capital
Expenditures, other than Capital Expenditures which are (i) not in excess of the
Base CapEx Amount for the relevant fiscal year and any permitted rollovers to
such fiscal year of unused amounts from the prior fiscal year or (ii) financed
with Deferred Reinvestment Amounts, (b) all amounts utilized by Details and its
Subsidiaries to finance investments permitted pursuant to Section 7.8(i), except
to the extent that the consideration (determined in accordance with such Section
7.8(i)) for all such investments made since the Closing
-10-
<PAGE>
Date does not exceed $30,000,000 in the aggregate, (c) all amounts utilized by
Details and its Subsidiaries to finance investments permitted pursuant to
Section 7.8(j), except to the extent that the aggregate amount of all such
investments (valued at cost, but net of returns of capital from such
investments) made since the Closing Date does not exceed $10,000,000 and (d) the
amount of any dividends paid by Details to finance the AHYDO Payment.
"Facility": each of (a) the Tranche A Term Loan Commitments and the
--------
Tranche A Term Loans made thereunder (the "Tranche A Term Loan Facility"), (b)
----------------------------
the Tranche B Term Loan Commitments and the Tranche B Term Loans made thereunder
(the "Tranche B Term Loan Facility") and (c) the Revolving Credit Commitments
----------------------------
and the extensions of credit made thereunder (the "Revolving Credit Facility").
-------------------------
"Foreign Subsidiary": any Subsidiary of Details that is not a
------------------
Domestic Subsidiary.
"Four Transactions": the collective reference to the Transaction, the
-----------------
merger of Details Inc and DI Acquisition Corp. consummated on or about October
28, 1997 and the other transactions in connection therewith, the Colorado
Springs Acquisition and the Cuplex Acquisition.
"Funded Debt": as to any Person, all Indebtedness of such Person that
-----------
matures more than one year from the date of its creation or matures within one
year from such date but is renewable or extendible, at the option of such
Person, to a date more than one year from such date or arises under a revolving
credit or similar agreement that obligates the lender or lenders to extend
credit during a period of more than one year from such date, including, without
limitation, all current maturities and current sinking fund payments in respect
of such Indebtedness whether or not required to be paid within one year from the
date of its creation and, in the case of the Borrowers, Indebtedness in respect
of the Loans.
"GAAP": generally accepted accounting principles in the United States
----
of America as in effect from time to time set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board and the rules and regulations of the
Securities and Exchange Commission, or in such other statements by such other
entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances of Details as of the date
of determination, except that for purposes of Section 7.1, GAAP shall be
determined on the basis of such principles in effect on the date hereof and
consistent with those used in the preparation of the most recent audited
financial statements delivered pursuant to Section 4.1(b). In the event that
any "Accounting Change" (as defined below) shall occur and such change results
in a change in the method of calculation of financial covenants, standards or
terms in this Agreement, then Details and the Administrative Agent agree to
enter into negotiations in order to amend such provisions of this Agreement so
as to equitably reflect such Accounting Changes with the desired result that the
criteria for evaluating the Borrower's financial condition shall be the same
after such Accounting Changes as if such Accounting Changes had not been made.
Until such time as such an amendment shall have been executed and delivered by
Details, the Administrative Agent and the Required Lenders, all financial
covenants, standards and terms in this Agreement shall continue to be calculated
or construed as if such Accounting Changes had not occurred. "Accounting
Changes" refers to changes in accounting principles required by the promulgation
of any rule, regulation, pronouncement or opinion by the Financial Accounting
Standards Board of the American Institute of
-11-
<PAGE>
Certified Public Accountants or, if applicable, the Securities and Exchange
Commission (or successors thereto or agencies with similar functions).
"Governmental Authority": any nation or government, any state or
----------------------
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government (including, without limitation, the National Association of
Insurance Commissioners).
"Guarantee and Collateral Agreement": the Guarantee and Collateral
----------------------------------
Agreement to be executed and delivered by New Intermediate Holdco, the Company,
the Borrowers and each Subsidiary Guarantor, substantially in the form of
Exhibit A, as the same may be amended, supplemented or otherwise modified from
time to time.
"Guarantee Obligation": as to any Person (the "guaranteeing person"),
-------------------- -------------------
any obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the guaranteeing person has issued a reimbursement, counterindemnity or
similar obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary obligations")
-------------------
of any other third Person (the "primary obligor") in any manner, whether
---------------
directly or indirectly, including, without limitation, any obligation of the
guaranteeing person, whether or not contingent, (i) to purchase any such primary
obligation or any Property constituting direct or indirect security therefor,
(ii) to advance or supply funds (1) for the purchase or payment of any such
primary obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase Property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided, however, that the term
-------- -------
Guarantee Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (b) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary obligation
and the maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by Details in good faith.
"Guarantors": the collective reference to the Subsidiary Guarantors,
----------
the Company and Details, in its capacity as a guarantor of the obligations of
DCI hereunder.
"Holdings": Details Holdings Corp., a California corporation.
--------
"Incur": as defined in Section 7.2.
-----
"Indebtedness": of any Person at any date, without duplication, (a)
------------
all indebtedness of such Person for borrowed money, (b) all obligations of such
Person for the deferred purchase price of
-12-
<PAGE>
Property or services (other than trade payables incurred in the ordinary course
of such Person's business which are current liabilities and other than Deferred
Payment Amounts), (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
Property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such Property), (e) all Capital Lease Obligations of
such Person, (f) all obligations of such Person, contingent or otherwise, as an
account party under bankers' acceptance, letter of credit or similar facilities,
(g) all obligations of such Person, contingent or otherwise, to purchase,
redeem, retire or otherwise acquire for value any Capital Stock (other than
common stock) of such Person, (h) all Guarantee Obligations of such Person in
respect of obligations of the kind referred to in clauses (a) through (g) above;
(i) all obligations of the kind referred to in clauses (a) through (h) above
secured by (or for which the holder of such obligation has an existing right,
contingent or otherwise, to be secured by) any Lien on Property (including,
without limitation, accounts and contract rights) owned by such Person, whether
or not such Person has assumed or become liable for the payment of such
obligation; and (j) for the purposes of Section 8(e) only, the net exposure of
such Person in respect of Interest Rate Protection Agreements.
"Insolvency": with respect to any Multiemployer Plan, the condition
----------
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
---------
"Intellectual Property": the collective reference to all rights,
---------------------
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including,
without limitation, copyrights, copyright licenses, patents, patent licenses,
trademarks, trademark licenses, technology, know-how and processes, and all
rights to sue at law or in equity for any infringement or other impairment
thereof, including the right to receive all proceeds and damages therefrom.
"Interest Payment Date": (a) as to any ABR Loan, the last day of each
---------------------
March, June, September and December to occur while such Loan is outstanding and
the final maturity date of such Loan, (b) as to any Eurodollar Loan having an
Interest Period of three months or less, the last day of such Interest Period,
(c) as to any Eurodollar Loan having an Interest Period longer than three
months, each day which is three months, or a whole multiple thereof, after the
first day of such Interest Period and the last day of such Interest Period and
(d) as to any Loan (other than any Revolving Credit Loan that is an ABR Loan and
any Swing Line Loan), the date of any repayment or prepayment made in respect
thereof.
"Interest Period": as to any Eurodollar Loan, (a) initially, the
---------------
period commencing on the borrowing or conversion date, as the case may be, with
respect to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the relevant Borrower in its notice of borrowing or
notice of conversion, as the case may be, given with respect thereto; and (b)
thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such Eurodollar Loan and ending one, two, three or
six months thereafter, as selected by the relevant Borrower by irrevocable
notice to the Administrative Agent not less than three Business Days prior to
the last day of the then current Interest Period with respect thereto; provided
--------
that, all of the foregoing provisions relating to Interest Periods are subject
to the following:
-13-
<PAGE>
(i) if any Interest Period would otherwise end on a day that is
not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
(ii) any Interest Period that would otherwise extend beyond the
Scheduled Revolving Credit Termination Date or beyond the date final
payment is due on the Tranche A Term Loans or the Tranche B Term Loans, as
the case may be, shall end on the Scheduled Revolving Credit Termination
Date or such due date, as applicable;
(iii) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of a calendar month; and
(iv) the Borrowers shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an Interest
Period for such Loan.
"Interest Rate Protection Agreement": any interest rate protection
----------------------------------
agreement, interest rate futures contract, interest rate option, interest rate
cap or other interest rate hedge arrangement, to or under which Details or any
of its Subsidiaries is a party or a beneficiary on the date hereof or becomes a
party or a beneficiary after the date hereof.
"Issuing Lender": The Chase Manhattan Bank or any of its Affiliates,
--------------
in its capacity as issuer of any Letter of Credit.
"L/C Commitment": $5,000,000.
--------------
"L/C Fee Payment Date": the last day of each March, June, September
--------------------
and December and the last day of the Revolving Credit Commitment Period.
"L/C Obligations": at any time, an amount equal to the sum of (a) the
---------------
aggregate then undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to Section 3.5.
"L/C Participants": the collective reference to all the Revolving
----------------
Credit Lenders other than the Issuing Lender.
"Letters of Credit": as defined in Section 3.1(a).
-----------------
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any capital lease having
substantially the same economic effect as any of the foregoing).
-14-
<PAGE>
"Loan": any loan made by any Lender pursuant to this Agreement.
----
"Loan Documents": this Agreement, the Security Documents and the
--------------
Notes.
"Loan Parties": the Company, the Borrowers and each other Subsidiary
------------
of Details which is a party to a Loan Document.
"Majority Facility Lenders": with respect to any Facility, the
-------------------------
holders of more than 50% of the aggregate unpaid principal amount of the Term
Loans or the Total Revolving Extensions of Credit, as the case may be,
outstanding under such Facility (or, in the case of the Revolving Credit
Facility, prior to any termination of the Revolving Credit Commitments, the
holders of more than 50% of the Total Revolving Credit Commitments.
"Majority Revolving Credit Facility Lenders": the Majority Facility
------------------------------------------
Lenders in respect of the Revolving Credit Facility.
"Mandatory Prepayment Date": as defined in Section 2.17(d).
-------------------------
"Material Adverse Effect": a material adverse effect on (a) the
-----------------------
Transaction, (b) the business, operations, property or condition (financial or
otherwise) of Details and its Subsidiaries taken as a whole or (c) the validity
or enforceability of this Agreement or any of the other Loan Documents or the
rights or remedies of the Administrative Agent or the Lenders hereunder or
thereunder.
"Material Environmental Amount": an amount payable by Details and/or
-----------------------------
its Subsidiaries in excess of $1,500,000 for remedial costs, compliance costs,
compensatory damages, punitive damages, fines, penalties or any combination
thereof.
"Materials of Environmental Concern": 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 Law, including, without limitation, asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.
"Material Subsidiary": any Subsidiary of the Company which has assets
-------------------
(valued at their fair market value) or annual revenues which are in excess of
$2,500,000 (and which shall in any event include Details and DCI).
"Mortgaged Properties": the real properties listed on Schedule 1.1B,
--------------------
as to which the Administrative Agent for the benefit of the Lenders shall be
granted a Lien pursuant to the Mortgages.
"Mortgages": each of the mortgages and deeds of trust made by any
---------
Loan Party in favor of, or for the benefit of, the Administrative Agent for the
benefit of the Lenders, substantially in the form of Exhibit H (with such
changes thereto as shall be advisable under the law of the jurisdiction in which
such mortgage or deed of trust is to be recorded), as the same may be amended,
supplemented or otherwise modified from time to time.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
------------------
in Section 4001(a)(3) of ERISA.
-15-
<PAGE>
"Net Cash Proceeds": (a) in connection with any Asset Sale or any
-----------------
Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents
(including any such proceeds received by way of deferred payment of principal
pursuant to a note or installment receivable or purchase price adjustment
receivable or otherwise, but only as and when received) of such Asset Sale or
Recovery Event, net of reasonable attorneys' fees, accountants' fees, investment
banking fees, amounts required to be applied to the repayment of Indebtedness
secured by a Lien expressly permitted hereunder on any asset which is the
subject of such Asset Sale or Recovery Event (other than any Lien pursuant to a
Security Document) and other customary and reasonable fees and expenses actually
incurred in connection therewith and net of taxes paid or reasonably estimated
to be payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements) and (b) in connection
with any issuance or sale of equity securities or debt securities or instruments
or the incurrence of loans, the cash proceeds received from such issuance or
incurrence, net of reasonable attorneys' fees, investment banking fees,
accountants' fees, underwriting discounts and commissions and other customary
fees and expenses actually incurred in connection therewith.
"New Intermediate Holdco": Details Intermediate Holding Corp., a
-----------------------
California corporation.
"New Intermediate Holdco Note Purchase Agreement": the Note Purchase
-----------------------------------------------
Agreement entered into by New Intermediate Holdco in connection with the
issuance of the New Intermediate Holdco Notes, together with all instruments and
other agreements entered into by New Intermediate Holdco in connection therewith
and any indenture entered into pursuant thereto, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with Section
7.9.
"New Intermediate Holdco Notes": the unsecured discount notes of New
-----------------------------
Intermediate Holdco issued pursuant to the New Intermediate Holdco Note Purchase
Agreement.
"Non-Excluded Taxes": as defined in Section 2.19(a).
------------------
"Non-U.S. Lender": as defined in Section 2.19(b).
---------------
"Notes": the collective reference to any promissory note evidencing
-----
Loans.
"Obligations": the unpaid principal of and interest on (including,
-----------
without limitation, interest accruing after the maturity of the Loans and
Reimbursement Obligations and interest accruing after the filing of any petition
in bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to either of the Borrowers, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) the Loans
and all other obligations and liabilities of the Borrowers to the Administrative
Agent or to any Lender (or, in the case of Interest Rate Protection Agreements,
any affiliate of any Lender), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, this Agreement, any other Loan
Document, the Letters of Credit, any Interest Rate Protection Agreement entered
into with any Lender or any affiliate of any Lender or any other document made,
delivered or given in connection herewith or therewith, whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses (including, without limitation, all fees,
-16-
<PAGE>
charges and disbursements of counsel to the Administrative Agent or to any
Lender that are required to be paid by the Borrowers pursuant hereto) or
otherwise.
"Participant": as defined in Section 11.6(b).
-----------
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
----
to Subtitle A of Title IV of ERISA (or any successor).
"Permitted Expenditure Amounts": at any date, the amount equal to (a)
-----------------------------
the sum of (i) all Designated Equity Amounts as of such date and (ii) any
portion of the Excess Cash Flow of the Company for fiscal years completed since
the Closing Date which was not required to be applied pursuant to the provisions
of Section 2.11(c) minus (b) the aggregate amount of Expenditure Use Amounts as
of such date.
"Permitted Holders": any of (a) Bain Capital and the Bain Affiliates,
-----------------
(b) each other holder of common stock of Holdings on the Closing Date and (c)
senior management employees of the Borrowers and Holdings.
"Person": an individual, partnership, corporation, limited liability
------
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which is
----
covered by ERISA and in respect of which Details or a Commonly Controlled Entity
is (or, if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Preferred Stock": any Capital Stock entitled by its terms to a
---------------
preference (a) as to dividends or (b) upon a distribution of assets.
"Prepayment Option Notice": as defined in Section 2.17(b).
------------------------
"Pricing Grid": the pricing grid attached hereto as Annex A.
------------
"Pro Forma Balance Sheets": as defined in Section 4.1(a).
------------------------
"Projections": as defined in Section 6.2(c).
-----------
"Property": any right or interest in or to property of any kind
--------
whatsoever, whether real, personal or mixed and whether tangible or intangible,
including, without limitation, Capital Stock.
"Real Properties": as defined in Section 4.17.
---------------
"Recapitalization Agreement": the Amended and Restated
--------------------------
Recapitalization Agreement, dated as of October 4, 1997, by and among DI
Acquisition Corp., Holdings and certain
-17-
<PAGE>
shareholders of Holdings, as amended, supplemented or otherwise modified in
accordance with the terms hereof and thereof.
"Recovery Event": any settlement of or payment in respect of any
--------------
property or casualty insurance claim or any condemnation proceeding relating to
any asset of the Company or any of its Subsidiaries.
"Refunded Swing Line Loans": as defined in Section 2.7.
-------------------------
"Refunding Date": as defined in Section 2.7.
--------------
"Register": as defined in Section 11.6(d).
--------
"Regulation U": Regulation U of the Board as in effect from time to
------------
time.
"Reimbursement Obligation": the obligation of the relevant Borrower
------------------------
to reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under
Letters of Credit.
"Reinvestment Deferred Amount": with respect to any Reinvestment
----------------------------
Event, the aggregate Net Cash Proceeds received by the Company or any of its
Subsidiaries in connection therewith which are not applied to prepay the Term
Loans or reduce the Revolving Credit Commitments pursuant to Section 2.11(b) as
a result of the delivery of a Reinvestment Notice.
"Reinvestment Event": any Asset Sale or Recovery Event in respect of
------------------
which Details has delivered a Reinvestment Notice.
"Reinvestment Notice": a written notice executed by a Responsible
-------------------
Officer stating that no Event of Default has occurred and is continuing and that
Details (directly or indirectly through a Subsidiary) intends and expects to use
all or a specified portion of the Net Cash Proceeds of an Asset Sale or Recovery
Event to acquire assets useful in its business.
"Reinvestment Prepayment Amount": with respect to any Reinvestment
------------------------------
Event, the Reinvestment Deferred Amount relating thereto less any amount
expended or then committed to be expended prior to the relevant Reinvestment
Prepayment Date to acquire assets useful in Details' business.
"Reinvestment Prepayment Date": with respect to any Reinvestment
----------------------------
Event, the earlier of (a) the date occurring six months (or, in the case of any
reinvestment to be made by Details or any of its Subsidiaries from the proceeds
of any property or casualty insurance claim, twelve months) after such
Reinvestment Event and (b) the date on which Details shall have determined not
to, or shall have otherwise ceased to, acquire assets useful in Details'
business with all or any portion of the relevant Reinvestment Deferred Amount.
"Reorganization": with respect to any Multiemployer Plan, the
--------------
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
-18-
<PAGE>
"Reportable Event": any of the events set forth in Section 4043(b) of
----------------
ERISA, other than those events as to which the thirty day notice period is
waived under subsection .13, .14, .16, .18, .19 or .20 of PBGC Reg. (S) 2615.
"Required Lenders": the holders of more than 50% of (a) until the
----------------
Closing Date, the Commitments and (b) thereafter, the sum of (i) the aggregate
unpaid principal amount of the Term Loans and (ii) the Total Revolving Credit
Commitments or, if the Revolving Credit Commitments have been terminated, the
Total Revolving Extensions of Credit.
"Required Prepayment Lenders": the Majority Facility Lenders in
---------------------------
respect of each Facility.
"Requirement of Law": 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 regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.
"Responsible Officer": the chief executive officer, president or
-------------------
chief financial officer of Details, but in any event, with respect to financial
matters, the chief financial officer of Details.
"Revolving Credit Commitment": as to any Lender, the obligation of
---------------------------
such Lender, if any, to make Revolving Credit Loans and participate in Swing
Line Loans and Letters of Credit, in an aggregate principal and/or face amount
not to exceed the amount set forth under the heading "Revolving Credit
Commitment" opposite such Lender's name on Schedule 1.1A, as the same may be
changed from time to time pursuant to the terms hereof.
"Revolving Credit Commitment Period": the period from and including
----------------------------------
the Closing Date to the Scheduled Revolving Credit Termination Date or such
earlier date on which the Revolving Credit Commitments shall terminate as
provided herein.
"Revolving Credit Lender": each Lender which has a Revolving Credit
-----------------------
Commitment or which has made Revolving Credit Loans.
"Revolving Credit Loans": as defined in Section 2.4.
----------------------
"Revolving Credit Percentage": as to any Revolving Credit Lender at
---------------------------
any time, the percentage which such Lender's Revolving Credit Commitment then
constitutes of the Total Revolving Credit Commitments (or, at any time after the
Revolving Credit Commitments shall have expired or terminated, the percentage
which the aggregate principal amount of such Lender's Revolving Credit Loans
then outstanding constitutes of the aggregate principal amount of the Revolving
Credit Loans then outstanding).
"Revolving Extensions of Credit": as to any Revolving Credit Lender
------------------------------
at any time, an amount equal to the sum of (a) the aggregate principal amount of
all Revolving Credit Loans made by such Lender then outstanding, (b) such
Lender's Revolving Credit Percentage of the aggregate
-19-
<PAGE>
principal amount of Swing Line Loans then outstanding and (c) such Lender's
Revolving Credit Percentage of the L/C Obligations then outstanding.
"Scheduled Revolving Credit Termination Date": July 22, 2004.
-------------------------------------------
"Second Closing Date": the Business Day immediately following the
-------------------
Closing Date.
"Securities Act": the Securities Act of 1933, as amended from time to
--------------
time, and the rules and regulations.
"Security Documents": the collective reference to the Guarantee and
------------------
Collateral Agreement, the Mortgages and all other security documents hereafter
delivered to the Administrative Agent granting a Lien on any Property of any
Person to secure the obligations and liabilities of any Loan Party under any
Loan Document.
"Senior Subordinated Note Indenture": the Indenture, dated as of
----------------------------------
November 18, 1997, entered into by Details and certain of its Subsidiaries in
connection with the issuance of the Senior Subordinated Notes, together with all
instruments and other agreements entered into by Details or such Subsidiaries in
connection therewith, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with Section 7.9.
"Senior Subordinated Notes": the subordinated notes of Details issued
-------------------------
pursuant to the Senior Subordinated Note Indenture.
"Single Employer Plan": any Plan which is covered by Title IV of
--------------------
ERISA, but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that, as of
-------
any date of determination, (a) the amount of the "present fair saleable value"
of the assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise", as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the liability of such Person on its
debts as such debts become absolute and matured, (c) such Person will not have,
as of such date, an unreasonably small amount of capital with which to conduct
its business, and (d) such Person will be able to pay its debts as they mature.
For purposes of this definition, (i) "debt" means liability on a "claim", and
(ii) "claim" means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y)
right to an equitable remedy for breach of performance if such breach gives rise
to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.
"Specified Change of Control": a "Change of Control" as defined in
---------------------------
any of the Senior Subordinated Note Indenture, the Company Indenture or the New
Intermediate Holdco Note Purchase Agreement.
-20-
<PAGE>
"Subsidiary": as to any Person, a corporation, partnership, limited
----------
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of Details and unless otherwise specified, DCI
shall be treated as a Subsidiary of Details.
"Subsidiary Guarantor": each Subsidiary of Details other than any
--------------------
Excluded Foreign Subsidiary.
"Swing Line Commitment": the obligation of the Swing Line Lender to
---------------------
make Swing Line Loans pursuant to Section 2.6 in an aggregate principal amount
at any one time outstanding not to exceed $5,000,000.
"Swing Line Lender": The Chase Manhattan Bank, in its capacity as the
-----------------
lender of Swing Line Loans.
"Swing Line Loans": as defined in Section 2.6.
----------------
"Swing Line Participation Amount": as defined in Section 2.7.
-------------------------------
"Tax Benefit": as defined in Section 2.19(c).
-----------
"Telerate Page" means the display designated as Page 3750 on the Dow
-------------
Jones Markets System (or such other page as may replace such page on such
service for the purpose of displaying the rates at which Dollar deposits are
offered by leading banks in the London interbank deposit market).
"Term Loan Lenders": the collective reference to the Tranche A Term
-----------------
Loan Lenders and the Tranche B Term Loan Lenders.
"Term Loans": the collective reference to the Tranche A Term Loans
----------
and the Tranche B Term Loans.
"Total Revolving Credit Commitments": at any time, the aggregate
----------------------------------
amount of the Revolving Credit Commitments at such time.
"Total Revolving Extensions of Credit": at any time, the aggregate
------------------------------------
amount of the Revolving Extensions of Credit of the Revolving Credit Lenders at
such time.
"Tranche A Term Loan": as defined in Section 2.1.
-------------------
"Tranche A Term Loan Commitment": as to any Lender, the obligation of
------------------------------
such Lender, if any, to make Tranche A Term Loans to the Borrowers hereunder in
an aggregate principal
-21-
<PAGE>
amount not to exceed the amount set forth under the heading "Tranche A Term Loan
Commitment" opposite such Lender's name on Schedule 1.1A.
"Tranche A Term Loan Lender": each Lender which has a Tranche A Term
--------------------------
Loan Commitment or which has made Tranche A Term Loans.
"Tranche A Term Loan Percentage": as to Tranche A Term Loan Lender at
------------------------------
any time, the percentage which such Lender's Tranche A Term Loan Commitment then
constitutes of the aggregate Tranche A Term Loan Commitments (or, at any time
after the Closing Date, the percentage which the aggregate principal amount of
such Lender's Tranche A Term Loans then outstanding constitutes of the aggregate
principal amount of the Tranche A Term Loans then outstanding).
"Tranche B Repayment Amount": as defined in Section 2.17(d).
--------------------------
"Tranche B Term Loan": as defined in Section 2.1.
-------------------
"Tranche B Term Loan Commitment": as to Tranche B Term Loan Lender,
------------------------------
the obligation of such Lender, if any, to make Tranche B Term Loans to the
Borrowers hereunder in an aggregate principal amount not to exceed the amount
set forth under the heading "Tranche B Term Loan Commitment" opposite such
Lender's name on Schedule 1.1A.
"Tranche B Term Loan Lender": each Lender which has a Tranche B Term
--------------------------
Loan Commitment or which has made Tranche B Term Loans.
"Tranche B Term Loan Percentage": as to any Lender at any time, the
------------------------------
percentage which such Lender's Tranche B Term Loan Commitment then constitutes
of the aggregate Tranche B Term Loan Commitments (or, at any time after the
Closing Date, the percentage which the aggregate principal amount of such
Lender's Tranche B Term Loans then outstanding constitutes of the aggregate
principal amount of the Tranche B Term Loans then outstanding).
"Transaction": as defined in Section 5.1(b).
-----------
"Transaction Agreement": the Stock Contribution and Merger Agreement,
---------------------
dated as of July 23, 1998, by and among DCI, Holdings and the shareholders of
DCI, as amended, supplemented or otherwise modified in accordance with the terms
hereof and thereof.
"Transaction Documents": the collective reference to the Transaction
---------------------
Agreement and all other agreements, documents and instruments executed or filed
by or on behalf of DCI or Holdings or any of its Subsidiaries or any of their
Affiliates with any Governmental Authority in connection with the Transaction.
"Transferee": as defined in Section 11.15.
----------
"Type": as to any Loan, its nature as an ABR Loan or a Eurodollar
----
Loan.
-22-
<PAGE>
"Uniform Customs": the Uniform Customs and Practice for Documentary
---------------
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
as the same may be amended from time to time.
"U.S. Taxes": as defined in Section 11.6(f)(ii).
----------
"Wholly Owned Subsidiary": as to any Person, any other Person all of
-----------------------
the Capital Stock of which (other than directors' qualifying shares required by
law) is owned by such Person directly and/or through other Wholly Owned
Subsidiaries.
"Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor that is
---------------------------------
a Wholly Owned Subsidiary of Details.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
-----------------------------
therein, all terms defined in this Agreement shall have the defined meanings
when used in the other Loan Documents or any certificate or other document made
or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Company and its Subsidiaries not defined in
Section 1.1 and accounting terms partly defined in Section 1.1, to the extent
not defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Term Loan Commitments. Subject to the terms and conditions
---------------------
hereof, (a) each Tranche A Term Loan Lender severally agrees to make term loans
to the Borrowers on the Closing Date and to DCI on the Second Closing Date (the
"Tranche A Term Loans") in an aggregate amount not to exceed the amount of the
--------------------
Tranche A Term Loan Commitment of such Lender and (b) each Tranche B Term Loan
Lender severally agrees to make term loans (the "Tranche B Term Loans") to the
--------------------
Borrowers on the Closing Date and on the Second Closing Date in an aggregate
amount not to exceed the amount of the Tranche B Term Loan Commitment of such
Lender; provided, that the aggregate amount of Term Loans which may be borrowed
--------
by DCI on the Closing Date shall not exceed $129,000,000. The Term Loans may
from time to time be Eurodollar Loans or ABR Loans, as determined by the
relevant Borrower and notified to the Administrative Agent in accordance with
Sections 2.2 and 2.12.
2.2 Procedure for Term Loan Borrowing. The Borrowers shall give the
---------------------------------
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 2:00 P.M., New York City time, one Business Day
prior to the requested Borrowing Date)
-23-
<PAGE>
requesting that the Tranche A Term Loan Lenders and the Tranche B Term Loan
Lenders make such Term Loans on the requested Borrowing Date (which must be a
Business Day) and specifying the amount to be borrowed. All Tranche A Term Loans
and Tranche B Term Loans initially shall be made as ABR Loans and shall be in an
amount equal to $1,000,000 or a whole multiple of $500,000 in excess thereof.
Any Term Loans which are made on the Closing Date may not be converted into or
continued as a Eurodollar Loan having an Interest Period in excess of one month
prior to the earlier of (a) the date which is 60 days after the Closing Date and
(b) the date upon which the Administrative Agent determines (in good faith) that
the syndication of the Commitments is complete. Upon receipt of any such notice
the Administrative Agent shall promptly notify each Term Loan Lender thereof.
Not later than 12:00 Noon, New York City time, on the requested Borrowing Date
each Term Loan Lender shall make available to the Administrative Agent at its
office specified in Section 11.2 an amount in immediately available funds equal
to the Term Loan or Term Loans to be made by such Lender. The Administrative
Agent shall credit the account of the relevant Borrower on the books of such
office of the Administrative Agent with the aggregate of the amounts made
available to the Administrative Agent by the Term Loan Lenders in immediately
available funds.
2.3 Repayment of Term Loans. (a) The Tranche A Term Loans of each
-----------------------
Tranche A Term Loan Lender shall mature in quarterly installments (other than
with respect to the last installment, which shall be due on July 22, 2004),
commencing on June 30, 1999, in an amount equal to such Lender's Tranche A Term
Loan Percentage of the amount set forth opposite the date on which such
installment is due:
<TABLE>
<CAPTION>
Installment Percentage
----------- ----------
<S> <C>
June 30, 1999 $ 675,000
September 30, 1999 $ 675,000
December 31, 1999 $ 675,000
March 31, 2000 $ 675,000
June 30, 2000 $1,125,000
September 30, 2000 $1,125,000
December 31, 2000 $1,125,000
March 31, 2001 $1,125,000
June 30, 2001 $4,950,000
September 30, 2001 $4,950,000
December 31, 2001 $4,950,000
March 31, 2002 $4,950,000
June 30, 2002 $4,950,000
September 30, 2002 $4,950,000
December 31, 2002 $6,300,000
March 31, 2003 $6,300,000
June 30, 2003 $6,750,000
September 30, 2003 $6,750,000
December 31, 2003 $6,750,000
March 31, 2004 $6,750,000
June 30, 2004 $6,750,000
July 22, 2004 $6,750,000
</TABLE>
-24-
<PAGE>
Any Tranche A Term Loans outstanding on July 22, 2004 shall be due and payable
on such date.
(b) The Tranche B Term Loan of each Tranche B Lender shall
mature in quarterly installments (other than with respect to the last
installment, which shall be due on April 22, 2005), commencing on June 30, 1999,
each of which shall be in an amount equal to such Lender's Tranche B Term Loan
Percentage of the amount set forth opposite the date on which such installment
is due:
<TABLE>
<CAPTION>
Installment Amount
----------- ------
<S> <C>
June 30, 1999 $ 330,000
September 30, 1999 $ 330,000
December 31, 1999 $ 330,000
March 31, 2000 $ 330,000
June 30, 2000 $ 330,000
September 30, 2000 $ 330,000
December 31, 2000 $ 330,000
March 31, 2001 $ 330,000
June 30, 2001 $ 330,000
September 30, 2001 $ 330,000
December 31, 2001 $ 330,000
March 31, 2002 $ 330,000
June 30, 2002 $ 330,000
September 30, 2002 $ 330,000
December 31, 2002 $ 330,000
March 31, 2003 $ 330,000
June 30, 2003 $ 330,000
September 30, 2003 $ 330,000
December 31, 2003 $ 330,000
March 31, 2004 $ 330,000
June 30, 2004 $ 330,000
September 30, 2004 $ 330,000
December 31, 2004 $52,470,000
March 31, 2005 $52,470,000
April 22, 2005 $52,800,000
</TABLE>
Any Tranche B Term Loans outstanding on April 22, 2005 shall be due and payable
on such date.
2.4 Revolving Credit Commitments. (a) Subject to the terms and
----------------------------
conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans ("Revolving Credit Loans") to the Borrowers from time to
----------------------
time during the Revolving Credit Commitment Period in an aggregate principal
amount at any one time outstanding which, when added to such Lender's Revolving
Credit Percentage of the sum of (i) the aggregate principal amount of the Swing
Line Loans then outstanding and (ii) the aggregate amount of the L/C Obligations
then outstanding, does not exceed the amount of such Lender's Revolving Credit
Commitment. During the Revolving Credit Commitment Period the Borrowers may use
the Revolving Credit Commitments by borrowing, prepaying the Revolving Credit
Loans in whole or in part, and reborrowing, all in accordance with
-25-
<PAGE>
the terms and conditions hereof. The Revolving Credit Loans may from time to
time be Eurodollar Loans or ABR Loans, as determined by the Borrowers and
notified to the Administrative Agent in accordance with Sections 2.5 and 2.12,
provided that no Revolving Credit Loan shall be made as a Eurodollar Loan after
- --------
the day that is one month prior to the Scheduled Revolving Credit Termination
Date.
(b) The Borrowers shall repay all outstanding Revolving Credit Loans
on the Scheduled Revolving Credit Termination Date (or such earlier date as all
amounts owing hereunder shall become due and payable).
2.5 Procedure for Revolving Credit Borrowing. The Borrowers may
----------------------------------------
borrow under the Revolving Credit Commitments during the Revolving Credit
Commitment Period on any Business Day, provided that the Borrowers shall give
--------
the Administrative Agent irrevocable notice (which notice must be received by
the Administrative Agent prior to (a) 3:00 P.M., New York City time, three
Business Days prior to the requested Borrowing Date, in the case of Eurodollar
Loans, or (b) 11:00 A.M., New York City time, on the requested Borrowing Date,
in the case of ABR Loans), specifying (i) the amount and Type of Revolving
Credit Loans to be borrowed, (ii) the requested Borrowing Date and (iii) in the
case of Eurodollar Loans, the respective amounts of each such Type of Loan and
the respective lengths of the initial Interest Period therefor. Each borrowing
under the Revolving Credit Commitments shall be in an amount equal to (x) in the
case of ABR Loans, $1,000,000 or a whole multiple of $500,000 in excess thereof
(or, if the then aggregate Available Revolving Credit Commitments are less than
$1,000,000, such lesser amount) and (y) in the case of Eurodollar Loans,
$5,000,000 or a whole multiple of $1,000,000 in excess thereof; provided that
--------
the Swing Line Lender may, on behalf of the Borrowers, request borrowings of ABR
Loans under the Revolving Credit Commitments in amounts other than those
specified above to the extent necessary to repay Refunded Swing Line Loans. Upon
receipt of any such notice from either Borrower, the Administrative Agent shall
promptly notify each Revolving Credit Lender thereof. Each Revolving Credit
Lender will make the amount of its pro rata share of each borrowing available to
--- ----
the Administrative Agent for the account of the relevant Borrower at the office
of the Administrative Agent specified in Section 11.2 prior to 12:00 Noon, New
York City time, on the Borrowing Date requested by such Borrower in funds
immediately available to the Administrative Agent. Such borrowing will then be
made available to such Borrower by the Administrative Agent crediting the
account of such Borrower on the books of such office with the aggregate of the
amounts made available to the Administrative Agent by the Revolving Credit
Lenders and in like funds as received by the Administrative Agent.
2.6 Swing Line Commitment. (a) Subject to the terms and conditions
---------------------
hereof, the Swing Line Lender agrees to make a portion of the credit otherwise
available to the Borrowers under the Revolving Credit Commitments from time to
time during the Revolving Credit Commitment Period by making swing line loans
("Swing Line Loans") to the Borrowers; provided that (i) the aggregate principal
- ------------------ --------
amount of Swing Line Loans outstanding at any time shall not exceed the Swing
Line Commitment then in effect (notwithstanding that the Swing Line Loans
outstanding at any time, when aggregated with the Swing Line Lender's other
outstanding Revolving Credit Loans hereunder, may exceed the Swing Line
Commitment then in effect) and (ii) the Borrowers shall not request, and the
Swing Line Lender shall not make, any Swing Line Loan if, after giving effect to
the making of such Swing Line Loan, the aggregate amount of the Available
Revolving Credit Commitments would be less than zero. During the Revolving
Credit Commitment Period, the Borrowers may use the
-26-
<PAGE>
Swing Line Commitment by borrowing, repaying and reborrowing, all in accordance
with the terms and conditions hereof. Swing Line Loans shall be made as ABR
Loans only and shall not be entitled to be converted into Eurodollar Loans.
(b) The Borrowers shall repay all outstanding Swing Line Loans on the
Scheduled Revolving Credit Termination Date or such earlier date on which the
Revolving Credit Commitments shall terminate as provided herein.
2.7 Procedure for Swing Line Borrowing; Refunding of Swing Line
-----------------------------------------------------------
Loans. (a) Whenever either Borrower desires that the Swing Line Lender make
Swing Line Loans it shall give the Swing Line Lender irrevocable telephonic
notice confirmed promptly in writing (which telephonic notice must be received
by the Swing Line Lender not later than 2:00 P.M., New York City time, on the
proposed Borrowing Date), specifying (i) the amount to be borrowed and (ii) the
requested Borrowing Date (which shall be a Business Day during the Revolving
Credit Commitment Period). Each borrowing under the Swing Line Commitment shall
be in an amount equal to $500,000 or a whole multiple of $100,000 in excess
thereof. Not later than 4:00 P.M., New York City time, on the Borrowing Date
specified in a notice in respect of Swing Line Loans, the Swing Line Lender
shall make available to the Administrative Agent at its office specified in
Section 11.2 an amount in immediately available funds equal to the amount of the
Swing Line Loan to be made by the Swing Line Lender. The Administrative Agent
shall make the proceeds of such Swing Line Loan available to the relevant
Borrower on such Borrowing Date by depositing such proceeds in the account of
such Borrower with the Administrative Agent on such Borrowing Date in
immediately available funds.
(b) The Swing Line Lender, at any time and from time to time in its
sole and absolute discretion may, on behalf of the Borrowers (which hereby
irrevocably directs the Swing Line Lender to act on its behalf), on notice given
by the Swing Line Lender no later than 2:00 P.M., New York City time, on the
requested Borrowing Date, request each Revolving Credit Lender to make, and each
Revolving Credit Lender hereby agrees to make, a Revolving Credit Loan, in an
amount equal to such Revolving Credit Lender's Revolving Credit Percentage of
the aggregate amount of the Swing Line Loans (the "Refunded Swing Line Loans")
-------------------------
outstanding on the date of such notice, to repay the Swing Line Lender. Each
Revolving Credit Lender shall make the amount of such Revolving Credit Loan
available to the Administrative Agent at its office set forth in Section 11.2 in
immediately available funds, not later than 4:00 P.M., New York City time, on
the date of such notice. The proceeds of such Revolving Credit Loans shall be
immediately applied by the Swing Line Lender to repay the Refunded Swing Line
Loans. The Borrowers irrevocably authorize the Swing Line Lender to charge the
Borrowers' accounts with the Administrative Agent (up to the amount available in
each such account) in order to immediately pay the amount of such Refunded Swing
Line Loans to the extent amounts received from the Revolving Credit Lenders are
not sufficient to repay in full such Refunded Swing Line Loans.
(c) If prior to the time a Revolving Credit Loan would have otherwise
been made pursuant to Section 2.7(b), one of the events described in Section
8(f) shall have occurred and be continuing with respect to either Borrower or if
for any other reason, as determined by the Swing Line Lender in its sole
discretion, Revolving Credit Loans may not be made as contemplated by Section
2.7(b), each Revolving Credit Lender shall, on the date such Revolving Credit
Loan was to have been made pursuant to the notice referred to in Section 2.7(b)
(the "Refunding Date"), purchase for cash an undivided participating interest in
--------------
an amount equal to (i) its Revolving Credit Percentage
-27-
<PAGE>
times (ii) the aggregate principal amount of Swing Line Loans then outstanding
which were to have been repaid with such Revolving Credit Loans (the "Swing Line
----------
Participation Amount").
- --------------------
(d) Whenever, at any time after the Swing Line Lender has received
from any Revolving Credit Lender such Lender's Swing Line Participation Amount,
the Swing Line Lender receives any payment on account of the Swing Line Loans,
the Swing Line Lender will distribute to such Lender its Swing Line
Participation Amount (appropriately adjusted, in the case of interest payments,
to reflect the period of time during which such Lender's participating interest
was outstanding and funded and, in the case of principal and interest payments,
to reflect such Lender's pro rata portion of such payment if such payment is not
sufficient to pay the principal of and interest on all Swing Line Loans then
due); provided, however, that in the event that such payment received by the
Swing Line Lender is required to be returned, such Revolving Credit Lender will
return to the Swing Line Lender any portion thereof previously distributed to it
by the Swing Line Lender.
(e) Each Revolving Credit Lender's obligation to make the Loans
referred to in Section 2.7(b) and to purchase participating interests pursuant
to Section 2.7(c) shall be absolute and unconditional and shall not be affected
by any circumstance, including, without limitation, (i) any setoff,
counterclaim, recoupment, defense or other right which such Revolving Credit
Lender or either Borrower may have against the Swing Line Lender, either
Borrower or any other Person for any reason whatsoever; (ii) the occurrence or
continuance of a Default or an Event of Default or the failure to satisfy any of
the other conditions specified in Section 5; (iii) any adverse change in the
condition (financial or otherwise) of either Borrower; (iv) any breach of this
Agreement or any other Loan Document by either Borrower, any other Loan Party or
any other Revolving Credit Lender; or (v) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing.
2.8 Commitment Fees, etc. (a) The Borrowers agree to pay to the
---------------------
Administrative Agent for the account of each Revolving Credit Lender a
commitment fee for the period from and including the Closing Date to the last
day of the Revolving Credit Commitment Period, computed at the Commitment Fee
Rate on the average daily amount of the Available Revolving Credit Commitment
(without giving effect to any Swing Line Loans which are then outstanding) of
such Lender during the period for which payment is made, payable quarterly in
arrears on the last day of each March, June, September and December and on the
Scheduled Revolving Credit Termination Date or such earlier date on which the
Revolving Credit Commitments shall terminate as provided herein, commencing on
the first of such dates to occur after the date hereof.
(b) Details agrees to pay to the Administrative Agent the fees in the
amounts and on the dates previously agreed to in writing by Details and the
Administrative Agent.
2.9 Termination or Reduction of Commitments. The Borrowers shall
---------------------------------------
have the right, upon not less than three Business Days' notice to the
Administrative Agent, to terminate the Revolving Credit Commitments or, from
time to time, to reduce the amount of the Revolving Credit Commitments; provided
--------
that no such termination or reduction of Revolving Credit Commitments shall be
permitted if, after giving effect thereto and to any prepayments of the
Revolving Credit Loans and Swing Line Loans made on the effective date thereof,
the Total Revolving Extensions of Credit would exceed the Total Revolving Credit
Commitments. Any such reduction shall be in an amount
-28-
<PAGE>
equal to $1,000,000, or a whole multiple thereof, and shall reduce permanently
the Revolving Credit Commitments then in effect.
2.10 Optional Prepayments. The Borrowers may at any time and from
--------------------
time to time prepay the Loans, in whole or in part, without premium or penalty,
upon irrevocable notice delivered to the Administrative Agent at least three
Business Days prior thereto in the case of Eurodollar Loans and at least one
Business Day prior thereto in the case of ABR Loans, which notice shall specify
the date and amount of prepayment and whether the prepayment is of Eurodollar
Loans or ABR Loans; provided, that if a Eurodollar Loan is prepaid on any day
--------
earlier than the last day of the Interest Period applicable thereto, the
Borrowers shall also pay any amounts owing pursuant to Section 2.20. Upon
receipt of any such notice the Administrative Agent shall promptly notify each
relevant Lender thereof. If any such notice is given, the amount specified in
such notice shall be due and payable on the date specified therein, together
with (except in the case of Revolving Credit Loans which are ABR Loans and any
Swing Line Loans) accrued interest to such date on the amount prepaid. Partial
prepayments of Term Loans and Revolving Credit Loans shall be in an aggregate
principal amount of $1,000,000 or a whole multiple thereof. Partial Prepayments
of Swing Line Loans shall be in an aggregate principal amount of $100,000 or a
whole multiple thereof. Amounts to be applied in connection with optional
prepayments of the Term Loans shall be applied pro rata among the Tranche A Term
--- ----
Loans and the Tranche B Term Loans based upon the outstanding principal amount
thereof.
2.11 Mandatory Prepayments and Commitment Reductions. (a) Unless
-----------------------------------------------
the Required Prepayment Lenders shall otherwise agree, if any Capital Stock or
Indebtedness shall be issued or Incurred by Holdings or any of its Subsidiaries,
an amount equal to 100% of the Net Cash Proceeds thereof shall be applied on the
date of such issuance or Incurrence toward the prepayment of the Term Loans and
the reduction of the Revolving Credit Commitments as set forth in Section
2.11(d); provided that no such prepayment and reduction shall be required
--------
pursuant to this Section 2.11(a) with respect to (i) Designated Equity Amounts,
(ii) any such Net Cash Proceeds from the issuance of Capital Stock which is
applied within five Business Days after the receipt thereof by the Company and
its Subsidiaries to repay Indebtedness Incurred in reliance upon the provisions
of Section 7.2(i) or (j) hereof, (iii) other than to the extent set forth
therein, Indebtedness Incurred in accordance with Section 7.2, (iv) any Net Cash
Proceeds from the issuance of Capital Stock by Holdings or the Incurrence of
Indebtedness by Holdings or New Intermediate Holdco which are used to finance
the AHYDO Payment and (v) up to $20,000,000 in aggregate Net Cash Proceeds from
the issuance of Capital Stock by Holdings after the Closing Date.
(b) Unless the Required Prepayment Lenders shall otherwise agree, if
on any date Holdings or any of its Subsidiaries shall receive Net Cash Proceeds
from any Asset Sale or Recovery Event then, unless a Reinvestment Notice shall
be delivered in respect thereof, such Net Cash Proceeds shall be applied on such
date toward the prepayment of the Term Loans and the reduction of the Revolving
Credit Commitments as set forth in Section 2.11(d); provided, that,
--------
notwithstanding the foregoing, (i) the aggregate Net Cash Proceeds of Asset
Sales that may be excluded from the foregoing requirement pursuant to a
Reinvestment Notice shall not exceed $4,000,000 in any fiscal year of Details
and (ii) on each Reinvestment Prepayment Date, an amount equal to the
Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event
shall be applied toward the prepayment of the Term Loans and the reduction of
the Revolving Credit Commitments as set forth in Section 2.11(d).
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(c) Unless the Required Prepayment Lenders shall otherwise agree,
if, for the period beginning on the Closing Date and ending on December 31, 1999
and for each fiscal year of Details thereafter, there shall be Excess Cash Flow,
the Borrowers shall, on the relevant Excess Cash Flow Application Date, apply
the ECF Percentage of such Excess Cash Flow toward the prepayment of the Term
Loans and the reduction of the Revolving Credit Commitments as set forth in
Section 2.11(d). Each such prepayment and commitment reduction shall be made on
a date (an "Excess Cash Flow Application Date") no later than five days after
---------------------------------
the earlier of (i) the date on which the financial statements of Details
referred to in Section 6.1(a), for the fiscal year with respect to which such
prepayment is made, are required to be delivered to the Lenders and (ii) the
date such financial statements are actually delivered.
(d) Amounts to be applied in connection with prepayments and
Commitment reductions made pursuant to Section 2.11 shall be applied, first, to
-----
the prepayment of the Term Loans (pro rata among the Tranche A Term Loans and
--- ----
the Tranche B Term Loans, based upon the outstanding principal amount thereof)
and, second, to reduce permanently the Revolving Credit Commitments. Any such
------
reduction of the Revolving Credit Commitments shall be accompanied by prepayment
of the Revolving Credit Loans and/or Swing Line Loans to the extent, if any,
that the Total Revolving Extensions of Credit exceed the amount of the Total
Revolving Credit Commitments as so reduced, provided that if the aggregate
--------
principal amount of Revolving Credit Loans and Swing Line Loans then outstanding
is less than the amount of such excess (because L/C Obligations constitute a
portion thereof), the Borrowers shall, to the extent of the balance of such
excess, replace outstanding Letters of Credit and/or deposit an amount in cash
in a cash collateral account established with the Administrative Agent for the
benefit of the Lenders on terms and conditions satisfactory to the
Administrative Agent. Subject to the immediately preceding sentence, the
application of any prepayment pursuant to Section 2.11 shall be made first to
ABR Loans and second to Eurodollar Loans. Each prepayment of the Loans under
Section 2.11 (except in the case of Revolving Credit Loans that are ABR Loans
and Swing Line Loans) shall be accompanied by accrued interest to the date of
such prepayment on the amount prepaid.
(e) All unpaid amounts owing hereunder shall be due and payable on
April 22, 2005.
2.12 Conversion and Continuation Options. (a) The Borrowers may
-----------------------------------
elect from time to time to convert Eurodollar Loans to ABR Loans by giving the
Administrative Agent at least one Business Days' prior irrevocable notice of
such election, provided that any such conversion of Eurodollar Loans may only be
--------
made on the last day of an Interest Period with respect thereto. The Borrowers
may elect from time to time to convert ABR Loans to Eurodollar Loans by giving
the Administrative Agent at least three Business Days' prior irrevocable notice
of such election (which notice shall specify the length of the initial Interest
Period therefor), provided that no ABR Loan under a particular Facility may be
--------
converted into a Eurodollar Loan (i) when any Event of Default has occurred and
is continuing and the Administrative Agent or the Majority Facility Lenders in
respect of such Facility have determined in its or their sole discretion not to
permit such conversions or (ii) after the date that is one month prior to the
final scheduled termination or maturity date of such Facility. Upon receipt of
any such notice the Administrative Agent shall promptly notify each relevant
Lender thereof.
(b) Any Eurodollar Loan may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrowers giving
irrevocable notice to the
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Administrative Agent, in accordance with the applicable provisions of the term
"Interest Period" set forth in Section 1.1, of the length of the next Interest
Period to be applicable to such Loans, provided that no Eurodollar Loan under a
--------
particular Facility may be continued as such (i) when any Event of Default has
occurred and is continuing and the Administrative Agent has or the Majority
Facility Lenders in respect of such Facility have determined in its or their
sole discretion not to permit such continuations or (ii) after the date that is
one month prior to the final scheduled termination or maturity date of such
Facility, and provided, further, that if the Borrowers shall fail to give any
-------- -------
required notice as described above in this paragraph or if such continuation is
not permitted pursuant to the preceding proviso such Loans shall be
automatically converted to ABR Loans on the last day of such then expiring
Interest Period. Upon receipt of any such notice the Administrative Agent shall
promptly notify each relevant Lender thereof.
2.13 Minimum Amounts and Maximum Number of Eurodollar Tranches.
---------------------------------------------------------
Notwithstanding anything to the contrary in this Agreement, all borrowings,
conversions, continuations and optional prepayments of Eurodollar Loans
hereunder and all selections of Interest Periods hereunder shall be in such
amounts and be made pursuant to such elections so that, (a) after giving effect
thereto, the aggregate principal amount of the Eurodollar Loans comprising each
Eurodollar Tranche shall be equal to $5,000,000 or a whole multiple of
$1,000,000 in excess thereof and (b) no more than ten Eurodollar Tranches shall
be outstanding at any one time.
2.14 Interest Rates and Payment Dates. (a) Each Eurodollar Loan
--------------------------------
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal to
the ABR plus the Applicable Margin.
(c) (i) If all or a portion of the principal amount of any Loan or
Reimbursement Obligation shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), all outstanding Loans and Reimbursement
Obligations (whether or not overdue) shall bear interest at a rate per annum
which is equal to (x) in the case of the Loans, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this Section 2.14
plus 2% or (y) in the case of Reimbursement Obligations, the rate applicable to
- ----
ABR Loans under the Revolving Credit Facility plus 2%, and (ii) if all or a
----
portion of any interest payable on any Loan or Reimbursement Obligation or any
commitment fee or other amount payable hereunder shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise), such overdue
amount shall bear interest at a rate per annum equal to the rate applicable to
ABR Loans under the relevant Facility plus 2% (or, in the case of any such other
----
amounts that do not relate to a particular Facility, the ABR plus 3.25%), in
----
each case, with respect to clauses (i) and (ii) above, from the date of such
non-payment until such amount is paid in full (as well after as before
judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing pursuant to paragraph (c) of this Section
--------
2.14 shall be payable from time to time on demand.
2.15 Computation of Interest and Fees. (a) Interest, fees and
--------------------------------
commissions payable pursuant hereto shall be calculated on the basis of a 360-
day year for the actual days elapsed, except
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<PAGE>
that, with respect to ABR Loans the rate of interest on which is calculated on
the basis of the Prime Rate, the interest thereon shall be calculated on the
basis of a 365- (or 366-, as the case may be) day year for the actual days
elapsed. The Administrative Agent shall as soon as practicable notify the
Borrowers and the relevant Lenders of each determination of a Eurodollar Rate.
Any change in the interest rate on a Loan resulting from a change in the ABR or
the Eurocurrency Reserve Requirements shall become effective as of the opening
of business on the day on which such change becomes effective. The
Administrative Agent shall as soon as practicable notify the Borrowers and the
relevant Lenders of the effective date and the amount of each such change in
interest rate.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrowers and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrowers, deliver to the
Borrowers a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to Section 2.14(a).
2.16 Inability to Determine Interest Rate. If prior to the first day
------------------------------------
of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrowers) that, by
reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for such
Interest Period, or
(b) the Administrative Agent shall have received notice from the
Majority Facility Lenders in respect of the relevant Facility that the
Eurodollar Rate determined or to be determined for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (as
conclusively certified by such Lenders) of making or maintaining their
affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrowers and the relevant Lenders as soon as practicable thereafter. If such
notice is given (x) any Eurodollar Loans under the relevant Facility requested
to be made on the first day of such Interest Period shall be made as ABR Loans,
(y) any Loans under the relevant Facility that were to have been converted on
the first day of such Interest Period to Eurodollar Loans shall be continued as
ABR Loans and (z) any outstanding Eurodollar Loans under the relevant Facility
that were to have been continued as such on such first day shall be converted on
such day to ABR Loans. Until such notice has been withdrawn by the
Administrative Agent, no further Eurodollar Loans under the relevant Facility
shall be made or continued as such, nor shall the Borrowers have the right to
convert Loans under the relevant Facility to Eurodollar Loans.
2.17 Pro Rata Treatment and Payments. (a) Each borrowing by the
-------------------------------
Borrowers from the Lenders hereunder, each payment by the Borrowers on account
of any commitment fee and any reduction of the Commitments of the Lenders shall
be made pro rata according to the respective Tranche A Term Loan Percentages,
--- ----
Tranche B Term Loan Percentages or Revolving Credit Percentages, as the case may
be, of the relevant Lenders.
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<PAGE>
(b) Each payment (including each prepayment) by a Borrower on account
of principal of and interest on the Tranche A Term Loans or the Tranche B Term
Loans shall be made pro rata according to the respective outstanding principal
--- ----
amounts of such Term Loans of such Borrower then held by the relevant Term Loan
Lenders (except as otherwise provided in paragraph (d) below). The amount of
each principal prepayment of the Term Loans shall be applied to reduce the then
remaining installments of the Tranche A Term Loans and Tranche B Term Loans, as
the case may be, pro rata based upon the then remaining principal amount
--- ----
thereof. Amounts prepaid on account of the Term Loans may not be reborrowed.
(c) Each payment (including each prepayment) by the Borrowers on
account of principal of and interest on the Revolving Credit Loans shall be made
pro rata according to the respective outstanding principal amounts of the
- --- ----
Revolving Credit Loans then held by the Revolving Credit Lenders.
(d) Notwithstanding anything to the contrary in Section 2.11(d) or
2.17, with respect to the amount of any mandatory prepayment described in
Section 2.11 that is allocated to Tranche B Term Loans (such amounts, the
"Tranche B Prepayment Amount"), at any time when Tranche A Term Loans remain
- ----------------------------
outstanding, the Borrowers will, in lieu of applying such amount to the
prepayment of Tranche B Term Loans as provided in Section 2.11, on the date
specified in Section 2.11 for such prepayment, give the Administrative Agent
telephonic notice (promptly confirmed in writing) requesting that the
Administrative Agent prepare and provide to each Tranche B Term Loan Lender a
notice (each, a "Prepayment Option Notice") as described below. As promptly as
------------------------
practicable after receiving such notice from the Borrowers, the Administrative
Agent will send to each Tranche B Term Loan Lender a Prepayment Option Notice,
which shall be in the form of Exhibit G, and shall include an offer by the
Borrowers to prepay on the date (each a "Mandatory Prepayment Date") that is 10
-------------------------
Business Days after the date of the Prepayment Option Notice, the relevant
Tranche B Term Loans of such Lender by an amount equal to the portion of the
Tranche B Prepayment Amount indicated in such Lender's Prepayment Option Notice
as being applicable to such Lender's Tranche B Term Loans. On the Mandatory
Prepayment Date, (i) the Borrowers shall pay to the Administrative Agent the
aggregate amount necessary to prepay that portion of the outstanding relevant
Term Loans in respect of which Tranche B Term Loan Lenders have accepted
prepayment as described above (such Lenders, the "Accepting Lenders"), and such
-----------------
amount shall be applied to reduce the Tranche B Repayment Amounts with respect
to each Accepting Lender and (ii) the Borrowers shall pay to the Administrative
Agent an amount equal to the remaining portion of the Tranche B Prepayment
Amount not accepted by the Accepting Lenders, and such amount shall be applied
to the prepayment of the Tranche A Term Loans.
(e) All payments (including prepayments) to be made by the Borrowers
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without setoff or counterclaim and shall be made prior to 12:00 Noon,
New York City time, on the due date thereof to the Administrative Agent, for the
account of the Lenders, at the Administrative Agent's office specified in
Section 11.2, in Dollars and in immediately available funds. The Administrative
Agent shall distribute such payments to the Lenders promptly upon receipt in
like funds as received. If any payment hereunder (other than payments on the
Eurodollar Loans) becomes due and payable on a day other than a Business Day,
such payment shall be extended to the next succeeding Business Day. If any
payment on a Eurodollar Loan becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day unless the result of such
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<PAGE>
extension would be to extend such payment into another calendar month, in which
event such payment shall be made on the immediately preceding Business Day. In
the case of any extension of any payment of principal pursuant to the preceding
two sentences, interest thereon shall be payable at the then applicable rate
during such extension.
(f) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrowers a
corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available to
the Administrative Agent. A certificate of the Administrative Agent submitted
to any Lender with respect to any amounts owing under this Section 2.17(f) shall
be conclusive in the absence of manifest error. If such Lender's share of such
borrowing is not made available to the Administrative Agent by such Lender
within three Business Days of such Borrowing Date, the Administrative Agent
shall also be entitled to recover such amount with interest thereon at the rate
per annum applicable to ABR Loans under the relevant Facility, on demand, from
the Borrowers.
2.18 Requirements of Law. (a) If the adoption of or any change in
-------------------
any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Letter of Credit, any Application or
any Eurodollar Loan made by it, or change the basis of taxation of payments
to such Lender in respect thereof (except for Taxes covered by Section 2.19
and changes in the rate of tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets held
by, deposits or other liabilities in or for the account of, advances, loans
or other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise included in the determination
of the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit, or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrowers shall 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 the Borrowers
--------
shall not be required to compensate a Lender pursuant to this paragraph for any
amounts incurred more than six months prior to the date that such
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<PAGE>
Lender notifies the Borrowers of such Lender's intention to claim compensation
therefor. If any Lender becomes entitled to claim any additional amounts
pursuant to this Section 2.18, it shall promptly notify the Borrowers (with a
copy to the Administrative Agent) of the event by reason of which it has become
so entitled.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under or in respect of any Letter of
Credit to a level below that which such Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time, after
submission by such Lender to the Borrowers (with a copy to the Administrative
Agent) of a written request therefor, the Borrowers shall pay to such Lender
such additional amount or amounts as will compensate such Lender for such
reduction; provided that the Borrowers shall not be required to compensate a
--------
Lender pursuant to this paragraph for any amounts incurred more than six months
prior to the date that such Lender notifies the Borrowers of such Lender's
intention to claim compensation therefor.
(c) A certificate as to any additional amounts payable pursuant to
this Section 2.18 submitted by any Lender to the Borrowers (with a copy to the
Administrative Agent) shall be conclusive in the absence of manifest error. The
obligations of the Borrowers pursuant to this Section 2.18 shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
2.19 Taxes. (a) All payments made by the Borrowers under this
-----
Agreement 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, collected, withheld or assessed by any Governmental
Authority, excluding net income taxes and franchise taxes (imposed in lieu of
net income taxes) imposed on the Administrative Agent or any Lender as a result
of a present or former connection between the Administrative Agent or such
Lender and the jurisdiction of the Governmental Authority imposing such tax or
any political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Administrative Agent or such Lender
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any other Loan Document). If any such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts
------------------
payable to the Administrative Agent or any Lender hereunder, the amounts so
payable to the Administrative Agent or such Lender shall be increased to the
extent necessary to yield to the Administrative 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 Agreement, provided,
--------
however, that the Borrowers shall not be required to (x) 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 to the extent such Lender fails to comply
with Section 2.19(b) or (y) compensate a Lender pursuant to this paragraph for
any amounts incurred more than six months prior to the date that such Lender
notifies the Borrowers of
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<PAGE>
such Lender's intention to claim compensation therefor. Whenever any Non-
Excluded Taxes are payable by the Borrowers, as promptly as possible thereafter
the Borrowers shall send to the Administrative 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 Borrowers showing payment thereof. If the
Borrowers fail to pay any Non-Excluded Taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent the required receipts or
other required documentary evidence, the Borrowers shall indemnify the
Administrative Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent or any Lender as a
result of any such failure. The agreements in this Section 2.19 shall survive
the termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder.
(b) Each Lender (or Transferee) that is not a citizen or resident of
the United States of America, a corporation, partnership or other entity created
or organized in or under the laws of the United States of America (or any
jurisdiction thereof), or any estate or trust that is subject to federal income
taxation regardless of the source of its income (a "Non-U.S. Lender") shall
---------------
deliver to the Borrowers and the Administrative Agent (or, in the case of a
Participant, to the Lender from which the related participation shall have been
purchased) two copies of either U.S. Internal Revenue Service Form 1001 or Form
4224, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest", a Form W-8, or any subsequent versions thereof
or successors thereto (and, if such Non-U.S. Lender delivers a Form W-8, an
annual certificate representing that such Non-U.S. Lender is not a "bank" for
purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within
the meaning of Section 871(h)(3)(B) of the Code) of the Borrowers and is not a
controlled foreign corporation related to the Borrowers (within the meaning of
Section 864(d)(4) of the Code)), properly completed and duly executed by such
Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S.
federal withholding tax on all payments by the Borrowers under this Agreement
and the other Loan Documents. Such forms shall be delivered by each Non-U.S.
Lender on or before the date it becomes a party to this Agreement (or, in the
case of any Participant, on or before the date such Participant purchases the
related participation). In addition, each Non-U.S. Lender shall deliver such
forms promptly upon the obsolescence or invalidity of any form previously
delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify
the Borrowers at any time it determines that it is no longer in a position to
provide any previously delivered certificate to the Borrowers (or any other form
of certification adopted by the U.S. taxing authorities for such purpose).
Notwithstanding any other provision of this Section 2.19(b), a Non-U.S. Lender
shall not be required to deliver any form pursuant to this Section 2.19(b) that
such Non-U.S. Lender is not legally able to deliver.
(c) In the event the Borrowers make any additional payment to any Lender
or the Administrative Agent pursuant to Section 2.19(a) and such Lender or the
Administrative Agent, by reason of payment by the Borrowers of any Taxes,
obtains a credit against, or return or reduction of, any tax payable by it in,
or any other currently realized tax benefit from, a taxing jurisdiction which it
would not have enjoyed but for such payment ("Tax Benefit"), such Lender or the
-----------
Administrative Agent shall, to the extent that it can do so without prejudice to
the retention of such Tax Benefit, thereupon pay to the Borrowers the amount
which, after the deduction of any additional tax savings realized as a result of
such payment, shall equal the amount of such Tax Benefit; provided, however,
-------- -------
that the Borrowers shall not be entitled to require such Lender or the
Administrative Agent to supply
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<PAGE>
it with details of its tax position or to inspect any records, including tax
returns, of any Lender or the Administrative Agent. The Borrowers agree to
reimburse the Administrative Agent and each Lender upon demand for out-of-pocket
costs and expenses (other than expenses incurred in connection with the
preparation of any tax returns) incurred in connection with any determination
required pursuant to this Section 2.19(c).
2.20 Indemnity. The Borrowers agree to indemnify each Lender and to
---------
hold each Lender harmless from any loss or expense (other than any loss of
Applicable Margin) which such Lender reasonably may sustain or incur as a
consequence of (a) default by the Borrowers in making a borrowing of, conversion
into or continuation of Eurodollar Loans after the Borrowers have given a notice
requesting the same in accordance with the provisions of this Agreement, (b)
default by the Borrowers in making any prepayment after the Borrowers have given
a notice thereof in accordance with the provisions of this Agreement or (c) the
making of a prepayment of Eurodollar Loans on a day which is not the last day of
an Interest Period with respect thereto. Such indemnification shall be based
upon the 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 such Interest Period (or, in the
case of a failure to borrow, convert or continue, the Interest Period that would
have commenced on the date of such failure) in each case at the applicable rate
of interest for such Loans provided for herein (excluding, however, the
Applicable Margin 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. A certificate as to any
amounts payable pursuant to this Section 2.20 submitted to the Borrowers by any
Lender shall be presumptively correct in the absence of manifest error. This
covenant shall survive the termination of this Agreement and the payment of the
Loans and all other amounts payable hereunder.
2.21 Change of Lending Office. Each Lender agrees that, upon the
------------------------
occurrence of any event giving rise to the operation of Section 2.18 or 2.19(a)
with respect to such Lender, it will, if requested by the Borrowers, use
reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans affected by such event with the
object of avoiding the consequences of such event; provided, that such
--------
designation is made on terms that, in the sole judgment of such Lender, cause
such Lender and its lending office(s) to suffer no economic, legal or regulatory
disadvantage, and provided, further, that nothing in this Section 2.21 shall
-------- -------
affect or postpone any of the obligations of any Borrower or the rights of any
Lender pursuant to Section 2.18 or 2.19(a).
2.22 Replacement of Lenders under Certain Circumstances. The
--------------------------------------------------
Borrowers shall be permitted to replace any Lender which (a) requests
reimbursement for amounts owing pursuant to Section 2.18 or 2.19 or (b) defaults
in its obligation to make Loans hereunder, with a replacement financial
institution; provided that (i) such replacement does not conflict with any
--------
Requirement of Law, (ii) no Event of Default shall have occurred and be
continuing at the time of such replacement, (iii) prior to any such replacement,
such Lender shall not have eliminated the continued need for payment of amounts
owing pursuant to Section 2.18 or 2.19, (iv) the replacement financial
institution shall purchase, at par, all Loans and other amounts owing to such
replaced Lender on or prior to the date of replacement, (v) the Borrowers shall
be liable to such replaced Lender under Section 2.20 if any Eurodollar Loan
owing to such replaced Lender shall be purchased other than on the last day of
the
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<PAGE>
Interest Period relating thereto, (vi) the replacement financial institution, if
not already a Lender, shall be reasonably satisfactory to the Administrative
Agent, (vii) the replaced Lender shall be obligated to make such replacement in
accordance with the provisions of Section 11.6 (provided that the Borrowers
shall be obligated to pay the registration and processing fee referred to
therein), (viii) until such time as such replacement shall be consummated, the
Borrowers shall pay all additional amounts (if any) required pursuant to Section
2.18 or 2.19, as the case may be, and (ix) any such replacement shall not be
deemed to be a waiver of any rights which the Borrowers, the Administrative
Agent or any other Lender shall have against the replaced Lender.
SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment. (a) Subject to the terms and conditions hereof,
--------------
the Issuing Lender, in reliance on the agreements of the other Revolving Credit
Lenders set forth in Section 3.4(a), agrees to issue letters of credit ("Letters
-------
of Credit") for the account of either Borrower on any Business Day during the
- ---------
Revolving Credit Commitment Period in such form as may be approved from time to
time by the Issuing Lender; provided that the Issuing Lender shall have no
--------
obligation to issue any Letter of Credit if, after giving effect to such
issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the
aggregate amount of the Available Revolving Credit Commitments would be less
than zero. Each Letter of Credit shall (i) be denominated in Dollars and (ii)
expire no later than the earlier of (x) the first anniversary of its date of
issuance and (y) the date which is five Business Days prior to the Scheduled
Revolving Credit Termination Date, provided that any Letter of Credit with a
--------
one-year term may provide for the renewal thereof for additional one-year
periods (which shall in no event extend beyond the date referred to in clause
(y) above).
(b) Each Letter of Credit shall be subject to the Uniform Customs
and, to the extent not inconsistent therewith, the laws of the State of New
York.
(c) The Issuing Lender shall not at any time be obligated to issue
any Letter of Credit hereunder if such issuance would conflict with, or cause
the Issuing Lender or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.2 Procedure for Issuance of Letter of Credit. The Borrowers may
------------------------------------------
from time to time request that the Issuing Lender issue a Letter of Credit by
delivering to the Issuing Lender at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuing Lender, and
such other certificates, documents and other papers and information as the
Issuing Lender may request. Upon receipt of any Application, the Issuing Lender
will process such Application and the certificates, documents and other papers
and information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuing Lender be required to issue any
Letter of Credit earlier than three Business Days after its receipt of the
Application therefor and all such other certificates, documents and other papers
and information relating thereto) by issuing the original of such Letter of
Credit to the beneficiary thereof or as otherwise may be agreed to by the
Issuing Lender and the Borrowers. The Issuing Lender shall furnish a copy of
such Letter of Credit to the relevant Borrower promptly following the issuance
thereof. The Issuing Lender shall promptly furnish to the Administrative Agent,
which shall in turn promptly furnish to the Lenders, notice of the issuance of
each Letter of Credit (including the amount thereof).
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3.3 Commissions, Fees and Other Charges. (a) The Borrowers will pay
-----------------------------------
a commission on all outstanding Letters of Credit at a per annum rate equal to
the Applicable Margin then in effect with respect to Eurodollar Loans under the
Revolving Credit Facility, shared ratably among the Revolving Credit Lenders and
payable quarterly in arrears on each L/C Fee Payment Date after the issuance
date. In addition, each Borrower shall pay to the Issuing Lender for its own
account a fronting fee of 1/4 of 1% per annum, payable quarterly in arrears on
each L/C Fee Payment Date after the issuance date with respect to each Letter of
Credit issued for the account of such Borrower.
(b) In addition to the foregoing fees and commissions, the Borrowers
shall pay or reimburse the Issuing Lender for such normal and customary costs
and expenses as are incurred or charged by the Issuing Lender in issuing,
negotiating, effecting payment under, amending or otherwise administering any
Letter of Credit.
3.4 L/C Participations. (a) The Issuing Lender irrevocably agrees
------------------
to grant and hereby grants to each L/C Participant, and, to induce the Issuing
Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably
agrees to accept and purchase and hereby accepts and purchases from the Issuing
Lender, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Revolving Credit Percentage in the Issuing Lender's obligations
and rights under each Letter of Credit issued hereunder and the amount of each
draft paid by the Issuing Lender thereunder. Each L/C Participant
unconditionally and irrevocably agrees with the Issuing Lender that, if a draft
is paid under any Letter of Credit for which the Issuing Lender is not
reimbursed in full by the relevant Borrower in accordance with the terms of this
Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at
the Issuing Lender's address for notices specified herein an amount equal to
such L/C Participant's Revolving Credit Percentage of the amount of such draft,
or any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion
of any payment made by the Issuing Lender under any Letter of Credit is paid to
the Issuing Lender within three Business Days after the date such payment is
due, such L/C Participant shall pay to the Issuing Lender on demand an amount
equal to the product of (i) such amount, times (ii) the daily average Federal
Funds Effective Rate during the period from and including the date such payment
is required to the date on which such payment is immediately available to the
Issuing Lender, times (iii) a fraction the numerator of which is the number of
days that elapse during such period and the denominator of which is 360. If any
such amount required to be paid by any L/C Participant pursuant to Section
3.4(a) is not made available to the Issuing Lender by such L/C Participant
within three Business Days after the date such payment is due, the Issuing
Lender shall be entitled to recover from such L/C Participant, on demand, such
amount with interest thereon calculated from such due date at the rate per annum
applicable to ABR Loans under the Revolving Credit Facility. A certificate of
the Issuing Lender submitted to any L/C Participant with respect to any amounts
owing under this Section shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Lender has made payment
under any Letter of Credit and has received from any L/C Participant its pro
---
rata share of such payment in accordance with Section 3.4(a), the Issuing Lender
- ----
receives any payment related to such Letter of Credit (whether directly from the
Borrowers or otherwise, including proceeds of collateral applied
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thereto by the Issuing Lender), or any payment of interest on account thereof,
the Issuing Lender will distribute to such L/C Participant its pro rata share
--- ----
thereof; provided, however, that in the event that any such payment received by
-------- -------
the Issuing Lender shall be required to be returned by the Issuing Lender, such
L/C Participant shall return to the Issuing Lender the portion thereof
previously distributed by the Issuing Lender to it.
3.5 Reimbursement Obligation of the Borrowers. Each Borrower agrees
-----------------------------------------
to reimburse the Issuing Lender on each date on which the Issuing Lender
notifies such Borrower of the date and amount of a draft presented under any
Letter of Credit issued for the account of such Borrower and paid by the Issuing
Lender for the amount of (a) such draft so paid and (b) any taxes, fees, charges
or other costs or expenses incurred by the Issuing Lender in connection with
such payment. Each such payment shall be made to the Issuing Lender at its
address for notices specified herein in lawful money of the United States of
America and in immediately available funds. Interest shall be payable on any
and all amounts remaining unpaid by the Borrowers under this Section from the
date such amounts become payable (whether at stated maturity, by acceleration or
otherwise) until payment in full at the rate set forth in Section 2.14(c). Each
drawing under any Letter of Credit shall (unless an event of the type described
in clause (i) or (ii) of Section 8(f) shall have occurred and be continuing with
respect to either of the Borrowers, in which case the procedures specified in
Section 3.4 for funding by L/C Participants shall apply) constitute a request by
the relevant Borrower to the Administrative Agent for a borrowing pursuant to
Section 2.5 of ABR Loans (or, at the option of each of the Administrative Agent
and the Swing Line Lender in its respective sole discretion, a borrowing
pursuant to Section 2.7 of Swing Line Loans) in the amount of such drawing. The
Borrowing Date with respect to such borrowing shall be the date of such drawing.
3.6 Obligations Absolute. The Borrowers' obligations under this
--------------------
Section 3 shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff, counterclaim or defense to payment which the
Borrowers may have or have had against the Issuing Lender, any beneficiary of a
Letter of Credit or any other Person. The Borrowers also agree with the Issuing
Lender that the Issuing Lender shall not be responsible for, and the Borrowers'
Reimbursement Obligations under Section 3.5 shall not be affected by, among
other things, the validity or genuineness of documents or of any endorsements
thereon, even though such documents shall in fact prove to be invalid,
fraudulent or forged, or any dispute between or among the Borrowers and any
beneficiary of any Letter of Credit or any other party to which such Letter of
Credit may be transferred or any claims whatsoever of the Borrowers against any
beneficiary of such Letter of Credit or any such transferee. The Issuing Lender
shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors or
omissions resulting from the gross negligence or willful misconduct of the
Issuing Lender. The Borrowers agree that any action taken or omitted by the
Issuing Lender under or in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross negligence or willful
misconduct and in accordance with the standards of care specified in the Uniform
Commercial Code of the State of New York, shall be binding on the Borrowers and
shall not result in any liability of the Issuing Lender to the Borrowers.
3.7 Letter of Credit Payments. If any draft shall be presented for
-------------------------
payment under any Letter of Credit, the Issuing Lender shall promptly notify the
relevant Borrower of the date and amount thereof. The responsibility of the
Issuing Lender to the Borrowers in connection with any draft presented for
payment under any Letter of Credit shall, in addition to any payment obligation
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<PAGE>
expressly provided for in such Letter of Credit, be limited to determining that
the documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are substantially in conformity with such
Letter of Credit.
3.8 Applications. To the extent that any provision of any
------------
Application related to any Letter of Credit is inconsistent with the provisions
of this Section 3, the provisions of this Section 3 shall apply.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Loans and issue or participate in the Letters of
Credit, the Company and the Borrowers hereby jointly and severally represent and
warrant to the Administrative Agent and each Lender that:
4.1 Financial Condition. (a) The unaudited pro forma summary
------------------- --- -----
consolidated balance sheets (including a detailed statement of shareholder's
equity) of (i) Details and its consolidated Subsidiaries as at June 30, 1998
(including the notes thereto) (the "Details Pro Forma Balance Sheet") and (ii)
-------------------------------
Holdings and its consolidated Subsidiaries as at June 30, 1998 (including the
notes thereto) (the "Holdings Pro Forma Balance Sheet"; and collectively with
--------------------------------
the Details Pro Forma Balance Sheet, the "Pro Forma Balance Sheets"), copies of
------------------------
which have heretofore been furnished to each Lender, have been prepared giving
effect (as if such events had occurred on June 30, 1998) to (i) the consummation
of the Transaction, (ii) the Indebtedness to be incurred on the Closing Date
(including, without limitation, the New Intermediate Holdco Notes) and the use
of proceeds thereof and (iii) the payment of fees and expenses in connection
with the foregoing. The Pro Forma Balance Sheets have been prepared giving
consideration, among other factors, to the requirements of Regulation S-X of the
Securities Act based on the best information available to Holdings and Details
as of the date of delivery thereof, are consistent in all material respects with
the forecasts previously delivered to the Lenders and present fairly in all
material respects on a pro forma basis the estimated financial position of
--- -----
Holdings and its consolidated
Subsidiaries and Details and its consolidated Subsidiaries, as the case may be,
as at June 30, 1998, assuming that the events specified in the preceding
sentence had actually occurred at such date.
(b) The audited consolidated balance sheets of Details as at December
31, 1997 and December 31, 1996, and the related consolidated statements of
income and of cash flows for the fiscal years ended on such dates, reported on
by and accompanied by an unqualified report from McGladrey & Pullen, with
respect to the 1996 fiscal year, and PricewaterhouseCoopers LLP, with respect to
the 1997 fiscal year, present fairly in all material respects the consolidated
financial condition of Details as at such dates, and the consolidated results of
its operations and its consolidated cash flows for the respective fiscal years
then ended. The audited consolidated balance sheets of DCI as at December 31,
1997 and December 31, 1996, and the related consolidated statements of income
and of cash flows for the fiscal years ended on such dates, reported on by and
accompanied by an unqualified report from PricewaterhouseCooopers LLP present
fairly in all material respects the consolidated financial condition of DCI as
at such dates, and the consolidated results of its operations and its
consolidated cash flows for the respective fiscal years then ended. The
unaudited consolidated balance sheet of Details as at March 31, 1998, and the
related unaudited consolidated statements of income and cash flows for the
three-month period ended on such date, present fairly in all material respects
the consolidated financial condition of Details as at such date, and the
consolidated results of its operations
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<PAGE>
and its consolidated cash flows for the three-month period then ended (subject
to normal year-end audit adjustments). The unaudited consolidated balance sheet
of DCI as at March 31, 1998, and the related unaudited consolidated statements
of income and cash flows for the three-month period ended on such date, present
fairly in all material respects the consolidated financial condition of DCI as
at such date, and the consolidated results of its operations and its
consolidated cash flows for the three-month period then ended (subject to normal
year-end audit adjustments). All such financial statements, including the
related schedules and notes thereto, have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except as approved by the
aforementioned firms of accountants and disclosed therein). Neither Details and
its Subsidiaries nor DCI and its Subsidiaries have any material Guarantee
Obligations, contingent liabilities and liabilities for taxes, or any long-term
leases or unusual forward or long-term commitments, including, without
limitation, any interest rate or foreign currency swap or exchange transaction
or other obligation in respect of derivatives, which are not reflected in the
most recent audited financial statements referred to in this paragraph (b).
During the period from December 31, 1997 to and including the date hereof there
has been no Disposition by Details or DCI or any of their respective
Subsidiaries of any material part of its business or Property.
4.2 No Change. Since December 31, 1997 there has been no development
---------
or event which has had or could reasonably be expected to have a Material
Adverse Effect.
4.3 Corporate Existence; Compliance with Law. Each of DCI, the
----------------------------------------
Company and their Subsidiaries (a) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (b) has
the corporate 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 in which it is currently engaged, (c) is duly qualified as a foreign
corporation 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 and (d) is in compliance with all Requirements of
Law except to the extent that the failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
4.4 Corporate Power; Authorization; Enforceable Obligations. Each
-------------------------------------------------------
Loan Party has the corporate power and authority, and the legal right, to make,
deliver and perform the Loan Documents to which it is a party and, in the case
of the Borrowers, to borrow hereunder. Each Loan Party has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Loan Documents to which it is a party and, in the case of the Borrowers, to
authorize the borrowings on the terms and conditions of this Agreement. 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 the Transaction and the borrowings hereunder or with the
execution, delivery, performance, validity or enforceability of this Agreement
or any of the Loan Documents, except (i) consents, authorizations, filings and
notices described in Schedule 4.4, (ii) those consents, authorizations, filings
and notices (to the extent material) which have been obtained or made and are in
full force and effect and (iii) the filings referred to in Section 4.19. Each
Loan Document has been duly executed and delivered on behalf of each Loan Party
party thereto. This Agreement constitutes, and each other Loan Document upon
execution will constitute, a legal, valid and binding obligation of each Loan
Party party thereto, enforceable against each such Loan Party in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization,
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<PAGE>
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).
4.5 No Legal Bar. The execution, delivery and performance of this
------------
Agreement and the other Loan Documents, the issuance of Letters of Credit, the
borrowings hereunder and the use of the proceeds thereof will not violate any
Requirement of Law or any Contractual Obligation of DCI, the Company or any of
their Subsidiaries and will not result in, or require, the creation or
imposition of any Lien on any of their respective properties or revenues
pursuant to any Requirement of Law or any such Contractual Obligation (other
than the Liens created by the Security Documents). No Requirement of Law or
Contractual Obligation applicable to DCI, the Company or any of their
Subsidiaries could reasonably be expected to have a Material Adverse Effect.
4.6 No Material Litigation. No litigation, investigation or
----------------------
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Company or the Borrowers, threatened by or against DCI,
the Company or any of their Subsidiaries or against any of their respective
properties or revenues (a) with respect to any of the Loan Documents or any of
the transactions contemplated hereby or thereby, or (b) which could reasonably
be expected to have a Material Adverse Effect.
4.7 No Default. Neither DCI, the Company nor any of their
----------
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which could reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
4.8 Ownership of Property; Liens. Each of DCI, the Company and each
----------------------------
of their Subsidiaries has title in fee simple to, or a valid leasehold interest
in, all its real property, and good title to, or a valid leasehold interest in,
all its other Property, and none of such Property is subject to any Lien except
as permitted by Section 7.3.
4.9 Intellectual Property. DCI, the Company and each of their
---------------------
Subsidiaries owns, or is licensed to use, all Intellectual Property necessary
for the conduct of its business as currently conducted. No material claim has
been asserted and is pending by any Person challenging or questioning the use of
any Intellectual Property or the validity or effectiveness of any Intellectual
Property, nor does the Company or any Borrower know of any valid basis for any
such claim. The use by DCI, the Company and their Subsidiaries of Intellectual
Property which is material to the operations of DCI, the Company and their
Subsidiaries does not infringe on the rights of any Person in any material
respect.
4.10 Taxes. Each of DCI, the Company and each of their Subsidiaries
-----
has filed or caused to be filed all Federal, state and other material tax
returns which are required to be filed and has paid all taxes shown to be due
and payable on said returns or on any assessments 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 the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided on the
books of DCI, the Company or their Subsidiaries, as the case may be); no tax
Lien has been filed, and (except as disclosed on Schedule 4.10), to the
knowledge of the
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<PAGE>
Company and the Borrowers, no claim is being asserted, with respect to any such
tax, fee or other charge.
4.11 Federal Regulations. No part of the proceeds of any Loans will
-------------------
be used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U of the Board as now and
from time to time hereafter in effect or for any purpose which violates the
provisions of the Regulations of the Board. If requested by any Lender or the
Administrative Agent, the Borrowers will furnish to the Administrative 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.
4.12 Labor Matters. There are no strikes or other labor disputes
-------------
against DCI, the Company or any of their Subsidiaries pending or, to the
knowledge of the Company or the Borrowers, threatened that (individually or in
the aggregate) could reasonably be expected to have a Material Adverse Effect.
Hours worked by, and payment made to, employees of DCI, the Company and their
Subsidiaries have not been in violation of the Fair Labor Standards Act or any
other applicable Requirement of Law dealing with such matters that (individually
or in the aggregate) could reasonably be expected to have a Material Adverse
Effect. All payments due from DCI, the Company or any of their Subsidiaries on
account of employee health and welfare insurance that (individually or in the
aggregate) could reasonably be expected to have a Material Adverse Effect if not
paid have been paid or accrued as a liability on the books of DCI, the Company
or such Subsidiary or otherwise disclosed in writing to the Lenders.
4.13 ERISA. Neither a Reportable Event nor an "accumulated funding
-----
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no
Lien in favor of the PBGC or a Plan has arisen, during such five-year period.
The present value of all accrued benefits under each Single Employer Plan (based
on those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits by a material amount. Neither the Borrowers nor any Commonly Controlled
Entity has had a complete or partial withdrawal from any Multiemployer Plan
which has resulted or could reasonably be expected to result in a material
liability under ERISA, and neither the Borrowers nor any Commonly Controlled
Entity would become subject to any material liability under ERISA if either of
the Borrowers or any such Commonly Controlled Entity were to withdraw completely
from all Multiemployer Plans as of the valuation date most closely preceding the
date on which this representation is made or deemed made. No such Multiemployer
Plan is in Reorganization or Insolvent.
4.14 Investment Company Act; Other Regulations. No Loan Party is an
-----------------------------------------
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. No Loan
Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) which limits its ability to incur Indebtedness.
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4.15 Subsidiaries. The Subsidiaries listed on Schedule 4.15
------------
constitute all the Subsidiaries of DCI and the Company at the date hereof.
4.16 Use of Proceeds. The proceeds of the Tranche A Term Loans and
---------------
the Tranche B Term Loans shall be used to finance a portion of the Transaction
and to pay related fees and expenses. The proceeds of the Revolving Credit
Loans, the Swing Line Loans and the Letters of Credit shall be used for working
capital needs and general corporate purposes of the Borrowers and their
Subsidiaries in the ordinary course of business (including in connection with
any acquisition described in Section 7.8(i) or (j)).
4.17 Environmental Matters.
---------------------
(a) The facilities and properties owned, leased or operated by DCI,
the Company or any of their Subsidiaries (the "Real Properties") do not
---------------
contain, and have not previously contained, any Materials of Environmental
Concern in amounts or concentrations or under circumstances which (i)
constitute or constituted a violation of, or (ii) could give rise to
liability under, any Environmental Law, except in either case insofar as
such violation or liability, or any aggregation thereof, could not
reasonably be expected to result in the payment of a Material Environmental
Amount.
(b) The Real Properties and all operations at the Real Properties are
in material compliance, and have in the last five years been in material
compliance, with all applicable Environmental Laws, and there is no
contamination at, under or about the Real Properties or violation of any
Environmental Law with respect to the Real Properties or the business
operated by DCI, the Company or any of their Subsidiaries (the "Business")
--------
which could materially interfere with the continued operation of the Real
Properties or materially impair the fair saleable value thereof. Neither
DCI, the Company nor any of their Subsidiaries has assumed any liability of
any other Person under Environmental Laws.
(c) Neither DCI, the Company nor any of their Subsidiaries has
received or is aware of any notice of violation, alleged violation, non-
compliance, liability or potential liability regarding environmental
matters or compliance with Environmental Laws with regard to any of the
Real Properties or the Business, nor does the Company or the Borrowers have
knowledge or reason to believe that any such notice will be received or is
being threatened, except insofar as such notice or threatened notice, or
any aggregation thereof, does not involve a matter or matters that could
reasonably be expected to result in the payment of a Material Environmental
Amount.
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<PAGE>
(e) No judicial proceeding or governmental or administrative action
is pending or, to the knowledge of the Company and the Borrowers,
threatened, under any Environmental Law to which DCI, the Company or any of
their Subsidiaries is or will be named as a party with respect to the Real
Properties or the Business, nor are there any consent decrees or other
decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any Environmental
Law with respect to the Real Properties or the Business, except insofar as
such proceeding, action, decree, order or other requirement, or any
aggregation thereof, could not reasonably be expected to result in the
payment of a Material Environmental Amount.
(f) There has been no release or threat of release of Materials of
Environmental Concern at or from the Real Properties, or arising from or
related to the operations of DCI, the Company or any of their Subsidiaries
in connection with the Real Properties or otherwise in connection with the
Business, in violation of or in amounts or in a manner that could give rise
to liability under Environmental Laws, except insofar as any such violation
or liability referred to in this paragraph, or any aggregation thereof,
could not reasonably be expected to result in the payment of a Material
Environmental Amount.
4.18 Accuracy of Information, etc. No statement or information
----------------------------
(other than the projections and the pro forma financial information described in
--- -----
the immediately following sentence) contained in this Agreement, any other Loan
Document, the Confidential Information Memorandum or any other document,
certificate or statement furnished to the Administrative Agent or the Lenders or
any of them, by or on behalf of any Loan Party for use in connection with the
transactions contemplated by this Agreement or the other Loan Documents taken as
a whole, contained as of the date such statement, information, document or
certificate was so furnished (or, in the case of the Confidential Information
Memorandum, as of the Closing Date), any untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
contained herein or therein not misleading. The projections and pro forma
--- -----
financial information contained in the materials referenced above are based upon
good faith estimates and assumptions believed by management of Details to be
reasonable at the time made, it being recognized by the Lenders that such
financial information as it relates to future events is not to be viewed as fact
and that actual results during the period or periods covered by such financial
information may differ from the projected results set forth therein by a
material amount. As of the date hereof, the representations and warranties
contained in the Transaction Agreement are true and correct in all material
respects. There is no fact known to any Loan Party that could reasonably be
expected to have a Material Adverse Effect that has not been expressly disclosed
herein, in the other Loan Documents, in the Confidential Information Memorandum
or in any other documents, certificates and statements furnished to the
Administrative Agent and the Lenders for use in connection with the transactions
contemplated hereby and by the other Loan Documents.
4.19 Security Documents. (a) The Guarantee and Collateral Agreement
------------------
is effective to create in favor of the Administrative Agent, for the benefit of
the Lenders, a legal, valid and enforceable security interest in the Collateral
described therein and proceeds thereof. When financing statements in
appropriate form are filed in the offices specified on Schedule 4.19(a), the
Guarantee and Collateral Agreement shall constitute a fully perfected Lien on,
and security interest in, all right, title and interest of the Loan Parties in
the Collateral and the proceeds thereof, as security for the
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Obligations (as defined in the Guarantee and Collateral Agreement), in each case
prior and superior in right to any other Person (other than Liens permitted by
Section 7.3).
(b) Each of the Mortgages is effective to create in favor of the
Administrative Agent, for the benefit of the Lenders, a legal, valid and
enforceable Lien on the Mortgaged Properties described therein and proceeds
thereof, and when the Mortgages are filed in the offices specified on Schedule
4.19(b), each such Mortgage shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the Loan Parties in the
Mortgaged Properties and the proceeds thereof, as security for the Obligations
(as defined in the relevant Mortgage), in each case prior and superior in right
to any other Person.
4.20 Solvency. Each Loan Party is, and after giving effect to the
--------
Transaction and the incurrence of all Indebtedness and obligations being
incurred in connection herewith and therewith will be and will continue to be,
Solvent.
4.21 Senior Indebtedness. The Obligations constitute "Senior
-------------------
Indebtedness" of Details under and as defined in the Senior Subordinated Note
Indenture. The obligations of each Subsidiary Guarantor under the Guarantee and
Collateral Agreement constitute "Guarantor Senior Indebtedness" of such
Subsidiary Guarantor under and as defined in the Senior Subordinated Note
Indenture.
4.22 Regulation H. No Mortgage encumbers improved real property that
------------
is located in an area that has been identified by the Secretary of Housing and
Urban Development as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of 1968
unless such insurance has been obtained.
4.23 Year 2000 Matters. The testing and reprogramming required to
-----------------
permit the proper functioning (but only to the extent that such proper
functioning would otherwise be impaired by the occurrence of the year 2000) in
and following the year 2000 of computer systems and other equipment containing
embedded microchips, in either case owned or operated by the Borrowers or any of
their Subsidiaries or used or relied upon in the conduct of their business
(including any such systems and other equipment supplied by others or with which
the computer systems of the Borrowers or any of their Subsidiaries interface),
and the testing of all such systems and other equipment as so reprogrammed began
to be implemented in February 1998, and the Borrowers have no reason to believe
that any such testing and reprogramming required for the Borrowers and their
Subsidiaries to be year 2000 compliant will not be completed by June 30, 1999.
The costs to the Borrowers and their Subsidiaries that have not been incurred as
of the date hereof for such reprogramming and testing and for the other
reasonably foreseeable consequences to them of any improper functioning of other
computer systems and equipment containing embedded microchips due to the
occurrence of the year 2000 could not reasonably be expected to result in a
Default or Event of Default or to have a Material Adverse Effect.
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4.24 Senior Indebtedness. The Indebtedness consisting of the Term
-------------------
Loans is being incurred as Indebtedness permitted respectively by the proviso to
each of clause (a) of Section 1011 of the Company Indenture and clause (a) of
Section 1010 of the Senior Subordinated Note Indenture. This Agreement replaces
the senior secured Credit Agreement, dated as of October 28, 1997 (as amended
and restated as of December 5, 1997), among the Company, The Chase Manhattan
Bank, as administrative agent and the lenders party thereto. The Revolving
Extensions of Credit and the Indebtedness consisting of the Term Loans
constitute "Senior Indebtedness" (as defined in each of the Company Indenture
and the Senior Subordinated Note Indenture) by virtue of being "Bank
Indebtedness" (as so defined in said indentures).
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Extension of Credit. The agreement of each
-----------------------------------------
Lender to make the initial extension of credit requested to be made by it is
subject to the satisfaction, prior to or concurrently with the making of such
extension of credit on the Closing Date, of the following conditions precedent:
(a) Loan Documents. The Administrative Agent shall have received (i)
--------------
this Agreement, executed and delivered by a duly authorized officer of the
Company and the Borrowers and (ii) the Guarantee and Collateral Agreement,
executed and delivered by a duly authorized officer of the Company,
Details, DCI and each other Subsidiary Guarantor.
(b) Transaction, etc. The following transactions (collectively with
----------------
all other transactions in connection therewith, the "Transaction") shall
-----------
have been consummated:
(i) The current common shareholders of DCI shall each have
contributed to Holdings approximately 40% of the common equity of DCI
held by each of them (the "40% Shares");
----------
(ii) Holdings shall have contributed the 40% Shares to New
Intermediate Holdco;
(iii) New Intermediate Holdco and investment funds managed by
Bain Capital each shall have contributed all of the common equity of
DCI then held by each of them to a Wholly Owned Subsidiary of New
Intermediate Holdco, a newly formed Delaware corporation, Details
Merger Corp. I ("MergerCo I"), and in return shall have received an
----------
equal number of shares of the common equity of MergerCo I;
(iv) MergerCo I shall have merged with and into DCI, the
holders of all of the outstanding common equity of DCI (other than
that held by Bain Capital and MergerCo I) shall have received an
aggregate amount of approximately $67,000,000 in exchange for the
cancellation of such common equity, the holders of the Class A
Preferred Stock of DCI shall have received an aggregate amount of
approximately $12,316,000 in exchange for the cancellation of such
Class A Preferred Stock and the Class B Preferred Stock of DCI (the
"DCI Preferred Stock") will remain outstanding;
-------------------
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<PAGE>
(v) New Intermediate Holdco shall have received not less than
$33,000,000 in net proceeds from the issuance of the New Intermediate
Holdco Notes, which proceeds shall be lent to DCI, in each case, on
terms and conditions reasonably satisfactory to the Administrative
Agent; and
(vi) The transactions undertaken pursuant to clauses (i)
through (v) above shall be undertaken pursuant to the Transaction
Documents and in form and substance consistent with the terms
previously disclosed to the Administrative Agent in writing and on
other terms reasonably satisfactory to the Lenders.
(c) Pro Forma Balance Sheets; Financial Statements. The Lenders
----------------------------------------------
shall have received (i) the Pro Forma Balance Sheets, (ii) audited
consolidated financial statements of each of Details and DCI for the 1997
and 1996 fiscal years and (iii) unaudited interim consolidated financial
statements of each of Details and DCI for each fiscal quarterly period
ended subsequent to the date of the latest applicable financial statements
delivered pursuant to clause (ii) of this paragraph as to which such
financial statements are available, and such financial statements shall
not, in the reasonable judgment of the Lenders, reflect any material
adverse change in the consolidated financial condition of Details or DCI,
as reflected in the financial statements or projections previously
distributed by Details to the Administrative Agent or the Lenders in
writing or which are contained in the Confidential Information Memorandum.
(d) Business Plan. The Lenders shall have received a satisfactory
-------------
written business plan for each fiscal year through the scheduled final
maturity of the Tranche B Term Loans.
(e) Capitalization. The capitalization and structure of Holdings and
--------------
each of its Subsidiaries after giving effect to the Transaction shall be
consistent with the capitalization and structure previously disclosed to
the Lenders in writing.
(f) Payment of Outstanding Indebtedness. Each of Details and DCI
-----------------------------------
shall have repaid its outstanding bank indebtedness in an aggregate
principal amount approximately equal to $106,100,000 and $64,725,000,
respectively, and the terms and conditions of any indebtedness of Details
and DCI to remain outstanding after the Closing Date shall be reasonably
satisfactory to the Administrative Agent.
(g) Lien Searches. The Administrative Agent shall have received the
-------------
results of a recent lien search in each of the jurisdictions where assets
of Holdings or any of its Subsidiaries are located, and such search shall
reveal no liens on any of the assets of Holdings or any of its Subsidiaries
except for liens permitted by Section 7.3 and liens to be discharged on or
prior to the Closing Date pursuant to documentation reasonably satisfactory
to the Administrative Agent.
(h) Closing Certificate. The Administrative Agent shall have
-------------------
received, with a counterpart for each Lender, a certificate of each Loan
Party, dated the Closing Date, substantially in the form of Exhibit C, with
appropriate insertions and attachments.
(i) Legal Opinions. The Administrative Agent shall have received the
--------------
following executed legal opinions:
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(i) the legal opinion of Ropes & Gray, counsel to the Company
and its Subsidiaries, substantially in the form of Exhibit E;
(ii) to the extent consented to by the relevant counsel, each
legal opinion, if any, delivered in connection with the Transaction
Agreement, accompanied by a reliance letter in favor of the Lenders;
and
(iii) the legal opinion of local counsel in California and of
such other special and local counsel as may be required by the
Administrative Agent.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent may
reasonably require.
(j) Filings, Registrations and Recordings. Each document (including,
-------------------------------------
without limitation, any Uniform Commercial Code financing statement)
required by the Security Documents or under law or reasonably requested by
the Administrative Agent to be filed, registered or recorded in order to
create in favor of the Administrative Agent, for the benefit of the
Lenders, a perfected Lien on the Collateral described therein, prior and
superior in right to any other Person (other than with respect to Liens
expressly permitted by Section 7.3), shall be in proper form for filing,
registration or recordation.
(k) Solvency Opinion. The Administrative Agent shall have received a
----------------
satisfactory solvency opinion from Murray, Devine & Co. which shall
document the solvency of the Company and its Subsidiaries on a consolidated
basis after giving effect to the Transaction, the financing thereof and the
other transactions contemplated hereby.
(l) Insurance. The Administrative Agent shall have received
---------
insurance certificates satisfying the requirements of Section 5.2 of the
Guarantee and Collateral Agreement.
(m) Environmental Audit. The Lenders shall have received a
-------------------
satisfactory environmental audit with respect to the real property owned or
leased by DCI and its Subsidiaries from a firm satisfactory to the
Administrative Agent.
(n) Transaction Documents. The Company and its Subsidiaries and
---------------------
Affiliates (i) shall not be in breach or violation of any of their
obligations under the Transaction Documents and (ii) shall not be subject
to any Requirements of Law or Contractual Obligations that would be
violated by the Transaction and none of the provisions of any of the
Transaction Documents shall have been amended, modified or waived in any
material respect without the written consent of the Administrative Agent.
(o) Transaction Fees and Expenses. The fees and expenses to be
-----------------------------
incurred in connection with the Transaction and the financing thereof shall
not exceed $12,750,000 in the aggregate.
(p) Financial Ratios. The Administrative Agent shall be satisfied
----------------
that (i) the Consolidated Leverage Ratio as at the Closing Date shall not
be greater than 5.40 to 1.0 and (ii) the "Consolidated Coverage Ratio" of
Details and its "Restricted Subsidiaries" (all as defined in
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<PAGE>
the Senior Subordinated Note Indenture) as at the Closing Date shall be at
least 2.00 to 1.0, and Details shall provide support for such calculations
which is reasonably satisfactory to the Administrative Agent (giving
consideration, among other factors, to the requirements of Regulation S-X
of the Securities Act).
5.2 Condition to Loans on the Second Closing Date. The agreement of
---------------------------------------------
each Lender to make the Loans to be made by it on the Second Closing Date is
subject to the satisfaction prior to or concurrently with the making of such
Loans on the Second Closing Date, of the following additional conditions
precedent:
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<PAGE>
(a) New Intermediate Holdco shall have contributed all of the common
equity owned by it in DCI to a wholly owned subsidiary of New Intermediate
Holdco, a newly formed Delaware corporation, Details Merger Corp. II
("MergerCo II");
-----------
(b) MergerCo II shall have merged with and into DCI and investment
funds managed by Bain Capital holding shares of common equity of DCI shall
have received an aggregate amount of approximately $23,000,000 in exchange
for the cancellation of such common equity;
(c) New Intermediate Holdco shall then contribute all of the common
equity of DCI to the Company which will then contribute all of such common
equity to Details; and
(d) The transactions undertaken pursuant to clauses (a) through (c)
above shall be undertaken pursuant to the Transaction Documents and in form
and substance consistent with the terms previously disclosed to the
Administrative Agent in writing and on other terms reasonably satisfactory
to the Lenders.
5.3 Conditions to Each Extension of Credit. The agreement of each
--------------------------------------
Lender to make any extension of credit requested to be made by it on any date
(including, without limitation, its initial extension of credit on the Closing
Date and any extension of credit on the Second Closing Date) is subject to the
satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties made by any Loan Party in or pursuant to the Loan Documents
shall be true and correct on and as of such date as if made on and as of
such date.
(b) No Default. No Default or Event of Default shall have occurred
----------
and be continuing on such date or after giving effect to the extensions of
credit requested to be made on such date.
Each borrowing by and issuance of a Letter of Credit on behalf of the Borrowers
hereunder shall constitute a representation and warranty by the Borrowers as of
the date of such extension of credit that the conditions contained in this
Section 5.3 have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
The Company and the Borrowers hereby jointly and severally agree that,
so long as the Commitments remain in effect, any Letter of Credit remains
outstanding or any Loan or other amount is owing to any Lender or the
Administrative Agent hereunder, each of the Company and the Borrowers shall and
shall cause each of their Subsidiaries to:
6.1 Financial Statements. Furnish to the Administrative Agent for
--------------------
distribution to each of the Lenders:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of New Intermediate Holdco and Details, a copy of
the audited consolidated balance sheet
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of New Intermediate Holdco and its consolidated Subsidiaries and Details
and its consolidated Subsidiaries as at the end of such year and the
related audited consolidated statements of income and of cash flows for
such year, setting forth in each case in comparative form the figures for
the previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope of
the audit, by PricewaterhouseCoopers LLP or other independent certified
public accountants of nationally recognized standing;
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of New Intermediate Holdco and Details, the unaudited consolidated
balance sheet of New Intermediate Holdco and its consolidated Subsidiaries
and Details and its consolidated Subsidiaries as at the end of such quarter
and the related unaudited consolidated statements of income and of cash
flows for such quarter and the portion of the fiscal year through the end
of such quarter, setting forth in each case in comparative form the figures
for the previous year, certified by a Responsible Officer as being fairly
stated in all material respects (subject to normal year-end audit
adjustments); and
(c) as soon as available, but in any event not later than 30 days
after the end of each month occurring during each fiscal year of New
Intermediate Holdco and Details (other than the third, sixth, ninth and
twelfth such month), the unaudited consolidated balance sheets of New
Intermediate Holdco and its consolidated Subsidiaries and Details and its
consolidated Subsidiaries as at the end of such month and the related
unaudited consolidated statements of income and of cash flows for such
month and the portion of the fiscal year through the end of such month,
setting forth in each case in comparative form the figures for the previous
year, certified by a Responsible Officer as being fairly stated in all
material respects (subject to normal year-end audit adjustments);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except (x) as approved by such accountants or officer, as the case may
be, and disclosed therein and (y) in the case of the financial statements
delivered pursuant to clauses (b) and (c) above, for the absence of footnotes).
6.2 Certificates; Other Information. Furnish to the Administrative
-------------------------------
Agent for distribution to each of the Lenders, or, in the case of clause (g), to
the relevant Lender:
(a) concurrently with the delivery of the financial statements
referred to in Section 6.1(a), a certificate of the independent certified
public accountants reporting on such financial statements stating that in
making the examination necessary therefor no knowledge was obtained of any
Default or Event of Default under the financial covenants set forth in
Section 7.1, except as specified in such certificate;
(b) concurrently with the delivery of any financial statements
pursuant to Section 6.1, (i) a certificate of a Responsible Officer stating
that, to the best of each such Responsible Officer's knowledge, each Loan
Party during such period has in all material respects observed or performed
all of its covenants and other agreements, and satisfied every condition,
contained in this Agreement and the other Loan Documents to which it is a
party to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no
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<PAGE>
knowledge of any Default or Event of Default except as specified in such
certificate and (ii) in the case of quarterly or annual financial
statements, (x) a Compliance Certificate containing all information
necessary for determining compliance by the Company and its Subsidiaries
with the provisions of this Agreement referred to therein as of the last
day of the fiscal quarter or fiscal year of Details, as the case may be,
and (y) to the extent not previously disclosed to the Administrative Agent,
a listing of any county or state within the United States where any Loan
Party keeps inventory or equipment and of any Intellectual Property
acquired by any Loan Party since the date of the most recent list delivered
pursuant to this clause (y) (or, in the case of the first such list so
delivered, since the Closing Date);
(c) as soon as available, and in any event no later than 45 days
after the end of each fiscal year of Details, a detailed consolidated
budget for the then-current fiscal year (including a projected consolidated
balance sheet of Details and its Subsidiaries as of the end of such then-
current fiscal year, and the related consolidated statements of projected
cash flow, projected changes in financial position and projected income),
and, as soon as available, significant revisions, if any, of such budget
and projections with respect to such fiscal year (collectively, the
"Projections"), which Projections shall in each case be accompanied by a
-----------
certificate of a Responsible Officer stating that such Projections are
based on reasonable estimates, information and assumptions and that such
Responsible Officer has no reason to believe that such Projections are
incorrect or misleading in any material respect;
(d) within 45 days after the end of each fiscal quarter of Details, a
narrative discussion and analysis of the financial condition and results of
operations of Details and its Subsidiaries for such fiscal quarter and for
the period from the beginning of the then current fiscal year to the end of
such fiscal quarter, as compared to the portion of the Projections covering
such periods and to the comparable periods of the previous year;
(e) no later than 3 Business Days prior to the effectiveness thereof
(or, to the extent that the consent of all or any portion of the Lenders is
required hereunder in connection with such amendment, supplement, waiver or
modification, no later than 10 Business Days prior to the effectiveness
thereof), copies of substantially final drafts of any proposed amendment,
supplement, waiver or other modification with respect to the Company
Indenture, the Senior Subordinated Note Indenture, the New Intermediate
Holdco Note Purchase Agreement or the Transaction Agreement;
(f) within five days after the same are sent, copies of all financial
statements and reports which Holdings, the Company or Details sends to the
holders of any class of its debt securities or public equity securities and
within five days after the same are filed, copies of all financial
statements and reports which Holdings, the Company or Details may make to,
or file with, the Securities and Exchange Commission or any successor or
analogous Governmental Authority; and
(g) promptly, such additional financial and other information as any
Lender may from time to time reasonably request.
6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at
----------------------
or before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature,
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<PAGE>
except where the amount or validity thereof is currently being contested in good
faith by appropriate proceedings and reserves in conformity with GAAP with
respect thereto have been provided on the books of the Company or its
Subsidiaries, as the case may be.
6.4 Conduct of Business and Maintenance of Existence, etc. 1 (a)
------------------------------------------------------
(i) Continue to engage in business of the same general type as now conducted by
it, (ii) preserve, renew and keep in full force and effect its corporate
existence and (iii) take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of its
business, except, in each case, as otherwise permitted by Section 7.4 and
except, in the case of clause (iii) above, to the extent that failure to do so
could not reasonably be expected to have a Material Adverse Effect; and1 (b)
comply with all Contractual Obligations and Requirements of Law except to the
extent that failure to comply therewith could not, in the aggregate, reasonably
be expected to have a Material Adverse Effect.
6.5 Maintenance of Property; Insurance. (a) Keep all Property
----------------------------------
useful and necessary in its business in good working order and condition,
ordinary wear and tear excepted and (b) maintain with financially sound and
reputable insurance companies insurance on all its Property in at least such
amounts and against at least such risks (but including in any event public
liability, product liability and business interruption) as are usually insured
against in the same general area by companies engaged in the same or a similar
business.
6.6 Inspection of Property; Books and Records; Discussions. (a)
------------------------------------------------------
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 business and activities and (b)
permit, upon two Business Days' prior notice to the chief financial officer or
other Responsible Officer of the Company or Details (except when a Default or
Event of Default has occurred and is continuing, in which case, no notice shall
be required), representatives of any Lender to visit and inspect any of its
properties and examine and make abstracts from any of its books and records at
any reasonable time and as often as may reasonably be desired and to discuss the
business, operations, properties and financial and other condition of the
Company and its Subsidiaries with officers and employees of the Company and its
Subsidiaries and with its independent certified public accountants; provided
--------
that all such visits and inspections shall be coordinated through the
Administrative Agent.
6.7 Notices. Promptly give notice to the Administrative Agent and
-------
each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any litigation, investigation or proceeding which may exist at
any time affecting Holdings or any of its Subsidiaries which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect;
(c) the following events, as soon as possible and in any event within
30 days after Details knows or has reason to know thereof: (i) the
occurrence of any Reportable Event with respect to any Plan, a failure to
make any required contribution to a Plan, the creation of any Lien in favor
of the PBGC or a Plan or any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan or (ii) the
institution of proceedings
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<PAGE>
or the taking of any other action by the PBGC or Details or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the withdrawal
from, or the termination, Reorganization or Insolvency of, any Plan; and
(d) any development or event which has had or could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this Section 6.7 shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Company or the relevant Subsidiary of the
Company proposes to take with respect thereto.
6.8 Environmental Laws. (a) Comply in all material respects with,
------------------
and 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 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 required by
applicable Environmental Laws.
(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.
6.9 Interest Rate Protection. In the case of Details, within 90 days
------------------------
after the Closing Date, enter into Interest Rate Protection Agreements to the
extent necessary to provide that at least 50% of the aggregate principal amount
of the Senior Subordinated Notes and the Term Loans is subject to either a fixed
interest rate or interest rate protection for a period of not less than three
years, which Interest Rate Protection Agreements shall have terms and conditions
reasonably satisfactory to the Administrative Agent.
6.10 Additional Collateral, etc. (a) With respect to any Property
--------------------------
acquired after the Closing Date by the Company or any of its Subsidiaries (other
than (x) any Property described in paragraph (b), (c) or (d) below and (y) any
Property subject to a Lien expressly permitted by Section 7.3(g)) as to which
the Administrative Agent, for the benefit of the Lenders, does not have a
perfected Lien, promptly (i) execute and deliver to the Administrative Agent
such amendments to the Guarantee and Collateral Agreement or such other
documents as the Administrative Agent deems necessary or advisable in order to
grant to the Administrative Agent, for the benefit of the Lenders, a security
interest in such Property and (ii) take all actions necessary or advisable to
grant to the Administrative Agent, for the benefit of the Lenders, a perfected
first priority security interest in such Property, including without limitation,
the filing of Uniform Commercial Code financing statements in such jurisdictions
as may be required by the Guarantee and Collateral Agreement or by law or as may
be requested by the Administrative Agent.
(b) With respect to any fee interest in any real estate having a
value (together with improvements thereof) of at least $1,000,000 acquired after
the Closing Date by the Company or any of its Subsidiaries (other than any such
real estate subject to a Lien expressly permitted by Section 7.3(g)), promptly
upon request of the Administrative Agent or the Required Lenders (i) execute and
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deliver a first priority Mortgage or deed of trust, as the case may be, in favor
of the Administrative Agent, for the benefit of the Lenders, covering such real
estate, in form and substance reasonably satisfactory to the Administrative
Agent, (ii) if requested by the Administrative Agent, provide the Lenders with
(x) title and extended coverage insurance covering such real estate in an amount
at least equal to the purchase price of such real estate (or such other amount
as shall be reasonably specified by the Administrative Agent) as well as a
current ALTA survey thereof, together with a surveyor's certificate and (y) any
consents or estoppels reasonably deemed necessary or advisable by the
Administrative Agent in connection with such mortgage or deed of trust, each of
the foregoing in form and substance reasonably satisfactory to the
Administrative Agent and (iii) if requested by the Administrative Agent, deliver
to the Administrative Agent legal opinions relating to the matters described
above, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent.
(c) With respect to any new Subsidiary (other than an Excluded
Foreign Subsidiary) created or acquired after the Closing Date by the Company
(which, for the purposes of this paragraph (c), shall include any existing
Subsidiary that ceases to be an Excluded Foreign Subsidiary) or any of its
Subsidiaries, promptly (i) execute and deliver to the Administrative Agent such
amendments to the Guarantee and Collateral Agreement as the Administrative Agent
deems necessary or advisable in order to grant to the Administrative Agent, for
the benefit of the Lenders, a perfected first priority security interest in the
Capital Stock of such new Subsidiary which is owned by the Company or any of its
Subsidiaries, (ii) cause such new Subsidiary (A) to become a party to the
Guarantee and Collateral Agreement and (B) to take such actions necessary or
advisable to grant to the Administrative Agent for the benefit of the Lenders a
perfected first priority security interest in the Collateral described in the
Guarantee and Collateral Agreement with respect to such new Subsidiary,
including, without limitation, the filing of Uniform Commercial Code financing
statements in such jurisdictions as may be required by the Guarantee and
Collateral Agreement or by law or as may be requested by the Administrative
Agent, and (iii) if requested by the Administrative Agent, deliver to the
Administrative Agent legal opinions relating to the matters described above,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent.
(d) With respect to any new Excluded Foreign Subsidiary created or
acquired after the Closing Date by the Company or any of its Subsidiaries,
promptly (i) execute and deliver to the Administrative Agent such amendments to
the Guarantee and Collateral Agreement as the Administrative Agent deems
necessary or advisable in order to grant to the Administrative Agent, for the
benefit of the Lenders, a perfected first priority security interest in the
Capital Stock of such new Subsidiary which is owned by the Company or any of its
Subsidiaries (provided that in no event shall more than 65% of the total
outstanding Capital Stock of any such new Subsidiary be required to be so
pledged), and (ii) if requested by the Administrative Agent, deliver to the
Administrative Agent legal opinions relating to the matters described above,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent.
6.11 DCI Drop Down. No later than the Second Closing Date, New
-------------
Intermediate Holdco shall contribute the note of DCI evidencing the loan
referred to in Section 5.1(b)(v) to the capital of DCI and, except for the DCI
Preferred Stock, shall cause DCI to be a Wholly Owned Subsidiary of Details as a
result of the transactions referred to in Section 5.2.
-57-
<PAGE>
6.12 Mortgages, etc. Within 30 days after the Closing Date (which
--------------
period may be extended by the Administrative Agent for up to an additional 30
days):
(i) The Administrative Agent shall have received a Mortgage with
respect to each Mortgaged Property, executed and delivered by a duly
authorized officer of each party thereto.
(ii) If requested by the Administrative Agent, the Administrative
Agent shall have received, and the title insurance company issuing the
policy referred to in clause (iii) below (the "Title Insurance Company")
-----------------------
shall have received, maps or plats of an as-built survey of the sites of
the Mortgaged Properties certified to the Administrative Agent and the
Title Insurance Company in a manner satisfactory to them, dated a date
satisfactory to the Administrative Agent and the Title Insurance Company by
an independent professional licensed land surveyor satisfactory to the
Administrative Agent and the Title Insurance Company, which maps or plats
and the surveys on which they are based shall be made in accordance with
the Minimum Standard Detail Requirements for Land Title Surveys jointly
established and adopted by the American Land Title Association and the
American Congress on Surveying and Mapping in 1992, and, without limiting
the generality of the foregoing, there shall be surveyed and shown on such
maps, plats or surveys the following: (A) the locations on such sites of
all the buildings, structures and other improvements and the established
building setback lines; (B) the lines of streets abutting the sites and
width thereof; (C) all access and other easements appurtenant to the sites;
(D) all roadways, paths, driveways, easements, encroachments and
overhanging projections and similar encumbrances affecting the site,
whether recorded, apparent from a physical inspection of the sites or
otherwise known to the surveyor; (E) any encroachments on any adjoining
property by the building structures and improvements on the sites; (F) if
the site is described as being on a filed map, a legend relating the survey
to said map; and (G) the flood zone designations, if any, in which the
Mortgaged Properties are located.
(iii) The Administrative Agent shall have received in respect of each
Mortgaged Property a mortgagee's title insurance policy (or policies) or
marked up unconditional binder for such insurance. Each such policy shall
(A) be in an amount satisfactory to the Administrative Agent; (B) be issued
at ordinary rates; (C) insure that the Mortgage insured thereby creates a
valid first Lien on such Mortgaged Property free and clear of all defects
and encumbrances, except as disclosed therein; (D) name the Administrative
Agent for the benefit of the Lenders as the insured thereunder; (E) be in
the form of ALTA Loan Policy - 1970 (Amended 10/17/70 and 10/17/84) (or
equivalent policies); (F) contain such endorsements and affirmative
coverage as the Administrative Agent may reasonably request and (G) be
issued by title companies satisfactory to the Administrative Agent
(including any such title companies acting as co-insurers or reinsurers, at
the option of the Administrative Agent). The Administrative Agent shall
have received evidence satisfactory to it that all premiums in respect of
each such policy, all charges for mortgage recording tax, and all related
expenses, if any, have been paid.
(iv) If requested by the Administrative Agent, the Administrative
Agent shall have received (A) a policy of flood insurance that (1) covers
any parcel of improved real property that is encumbered by any Mortgage (2)
is written in an amount not less than the outstanding principal amount of
the indebtedness secured by such Mortgage that is reasonably allocable to
-58-
<PAGE>
such real property or the maximum limit of coverage made available with
respect to the particular type of property under the National Flood
Insurance Act of 1968, whichever is less, and (3) has a term ending not
later than the maturity of the Indebtedness secured by such Mortgage and
(B) confirmation that the Borrower has received the notice required
pursuant to Section 208(e)(3) of Regulation H of the Board.
(v) The Administrative Agent shall have received a copy of all
recorded documents referred to, or listed as exceptions to title in, the
title policy or policies referred to in clause (iii) above and a copy of
all other material documents affecting the Mortgaged Properties.
SECTION 7. NEGATIVE COVENANTS
The Company and the Borrowers hereby jointly and severally agree that,
so long as the Commitments remain in effect, any Letter of Credit remains
outstanding or any Loan or other amount is owing to any Lender or the
Administrative Agent hereunder, each of the Company and the Borrowers shall not,
and shall not permit any of their Subsidiaries to, directly or indirectly:
7.1 Financial Condition Covenants.
-----------------------------
(a) Consolidated Leverage Ratio. Permit the Consolidated Leverage
---------------------------
Ratio as at the last day of any period of four consecutive fiscal quarters of
Details ending during any period set forth below to exceed the ratio set forth
below opposite such period:
Consolidated
Period Leverage Ratio
------ --------------
Closing Date through December 30, 1999 6.00 to 1.0
December 31, 1999 through September 29, 2000 5.25 to 1.0
September 30, 2000 through September 29, 2001 4.50 to 1.0
September 30, 2001 through September 29, 2002 4.00 to 1.0
September 30, 2002 through September 29, 2003 3.50 to 1.0
September 30, 2003 through thereafter 3.00 to 1.0
(b) Consolidated Interest Coverage Ratio. Permit the Consolidated
------------------------------------
Interest Coverage Ratio for any period of four consecutive fiscal quarters of
Details ending during any period set forth below to be less than the ratio set
forth below opposite such period:
Consolidated Interest
Period Coverage Ratio
------ ----------------------
Closing Date through September 29, 1999 1.75 to 1.0
September 30, 1999 through September 29, 2000 1.85 to 1.0
September 30, 2000 through September 29, 2001 2.25 to 1.0
September 30, 2001 through September 29, 2002 2.50 to 1.0
September 30, 2002 through September 29, 2003 2.75 to 1.0
September 30, 2003 through thereafter 3.00 to 1.0
-59-
<PAGE>
(c) Consolidated Fixed Charge Coverage Ratio. Permit the
----------------------------------------
Consolidated Fixed Charge Coverage Ratio for any period of four consecutive
fiscal quarters (commencing with the period of four consecutive fiscal quarters
ending on December 31, 1998) of Details to be less than 1.05 to 1.0.
(d) Minimum EBITDA. Permit Consolidated EBITDA for any fiscal year
--------------
set forth below to be less than the amount set forth opposite such fiscal year:
Consolidated
Fiscal Year EBITDA
----------- ------------
1998 60,000,000
1999 67,500,000
2000 75,000,000
2001 80,000,000
2002 85,000,000
2003 90,000,000
2004 90,000,000
2005 90,000,000
7.2 Limitation on Indebtedness. Create, incur, assume or suffer to
--------------------------
exist (in each case, to "Incur") any Indebtedness or issue any Preferred Stock,
-----
except:
(a) Indebtedness of any Loan Party pursuant to any Loan Document;
(b) Indebtedness of Details to any Subsidiary and of any Wholly Owned
Subsidiary Guarantor to Details or any other Subsidiary;
(c) Indebtedness secured by Liens permitted by Section 7.3(g) in an
aggregate principal amount not to exceed $4,000,000 at any one time
outstanding;
(d) Capital Lease Obligations existing on the date hereof and other
Capital Lease Obligations, which other Capital Lease Obligations shall not
exceed $10,000,000 aggregate principal amount at any one time outstanding;
(e) Indebtedness outstanding on the date hereof and listed on
Schedule 7.2(e) and any refinancings, refundings, renewals or extensions
thereof (without any increase in the principal amount thereof);
(f) guarantees made in the ordinary course of business by Details or
any of its Subsidiaries of obligations of any Wholly Owned Subsidiary
Guarantor;
(g) (i) Indebtedness of Details in respect of the Senior Subordinated
Notes in an aggregate principal amount not to exceed $100,000,000 and (ii)
Indebtedness of the Company in respect of the Company Zeros in an
aggregate, unaccreted principal amount not to exceed $60,100,000;
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<PAGE>
(h) Indebtedness of the Company evidenced by the increase in the
principal amount of the Company Zeros in connection with the payment in
kind of interest thereon prior to the fifth anniversary of the Closing
Date;
(i) Indebtedness of a Person which becomes a Subsidiary after the
date hereof; provided, that (i) such Indebtedness existed at the time such
--------
Person became a Subsidiary and was not created in anticipation of the
acquisition and (ii) such Indebtedness was not created in contemplation of
such Person becoming a Subsidiary;
(j) Indebtedness of Details and its Subsidiaries on account of the
deferred purchase price for acquisitions of Capital Stock and assets
permitted pursuant to Section 7.8;
(k) guarantees made by Subsidiaries of Details on account of the
Senior Subordinated Notes; provided, that such guarantees are subordinated
--------
to the obligations of such Subsidiaries under the Guarantee and Collateral
Agreement and the other Security Documents upon terms satisfactory to the
Administrative Agent;
(l) (i) the DCI Preferred Stock and (ii) any other Preferred Stock
which is not redeemable and is not convertible into debt obligations of the
Company or any of its Subsidiaries, in each case, during the term of this
Agreement, the dividends with respect to which are payable only in kind and
the other terms and conditions of which are reasonably satisfactory to the
Administrative Agent; and
(m) additional Indebtedness of Details or any of its Subsidiaries in
an aggregate principal amount (for Details and all Subsidiaries) not to
exceed $20,000,000 at any one time outstanding.
7.3 Limitation on Liens. Create, incur, assume or suffer to exist
-------------------
any Lien upon any of its Property or revenues, whether now owned or hereafter
acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, provided that adequate reserves with
--------
respect thereto are maintained on the books of Details or its Subsidiaries,
as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are
not overdue for a period of more than 30 days or which are being contested
in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(e) Liens in existence on the date hereof listed on Schedule 7.3(e),
securing Indebtedness permitted by Section 7.2(e), provided that no such
--------
Lien is spread to cover any
-61-
<PAGE>
additional Property after the Closing Date and that the amount of Indebtedness
secured thereby is not increased;
(f) zoning restrictions, easements, rights-of-way, restrictions and
other similar encumbrances incurred in the ordinary course of business
which, in the aggregate, are not substantial in amount and which do not in
any case materially detract from the value of the Property subject thereto
or materially interfere with the ordinary conduct of the business of
Details or any of its Subsidiaries;
(g) Liens securing Indebtedness of Details or any of its Subsidiaries
incurred pursuant to Section 7.2(c) to finance the acquisition of fixed or
capital assets, provided that (i) such Liens shall be created substantially
--------
simultaneously with the acquisition of such fixed or capital assets, (ii)
such Liens do not at any time encumber any Property other than the Property
financed by such Indebtedness and (iii) the amount of Indebtedness secured
thereby is not increased;
(h) Liens created pursuant to the Security Documents;
(i) any interest or title of a lessor under any lease entered into by
Details or any Subsidiary in the ordinary course of its business and
covering only the assets so leased (including, without limitation, with
respect to the capital leases of Details' principal manufacturing facility
and related equipment and covering only such facility and related
equipment); and
(j) Liens not otherwise permitted by this Section 7.3 so long as
neither (i) the aggregate principal amount of the obligations secured
thereby nor (ii) the aggregate fair market value (determined as of the date
such Lien is incurred) of the assets subject thereto exceeds (as to Details
and all Subsidiaries) $4,000,000 at any one time outstanding.
7.4 Limitation on Fundamental Changes. Enter into any merger,
---------------------------------
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or Dispose of, all or substantially all
of its Property or business, or make any material change in its present method
of conducting business, except:
(a) any Subsidiary of Details may be merged or consolidated with or
into Details (provided that Details shall be the continuing or surviving
--------
corporation) or with or into any Wholly Owned Subsidiary Guarantor
(provided that the Wholly Owned Subsidiary Guarantor shall be the
--------
continuing or surviving corporation);
(b) Details or any of its Subsidiaries may Dispose of any or all of
its assets (upon voluntary liquidation or otherwise) to Details or any
Wholly Owned Subsidiary Guarantor; and
(c) any Person may be merged or consolidated with or into Details or
any of its Subsidiaries pursuant to an investment permitted subsection
7.8(i) or (j) (provided that Details or the applicable Subsidiary shall be
--------
the continuing or surviving corporation).
-62-
<PAGE>
7.5 Limitation on Sale of Assets. Dispose of any of its Property or
----------------------------
business (including, without limitation, receivables and leasehold interests),
whether now owned or hereafter acquired, or, in the case of any Subsidiary,
issue or sell any shares of such Subsidiary's Capital Stock to any Person,
except:
(a) the Disposition of property or assets that are no longer used or
useful in the ordinary course of business;
(b) the sale of inventory in the ordinary course of business;
(c) Dispositions permitted by Section 7.4(b);
(d) the sale or issuance of any Subsidiary's Capital Stock to Details
or any Wholly Owned Subsidiary Guarantor;
(e) Details and its Subsidiaries may, in the ordinary course of
business, license Intellectual Property to third Persons and to one
another, so long as each such license does not otherwise prohibit the
granting of a Lien by Details or any of its Subsidiaries pursuant to the
Security Documents in the Intellectual Property which is the subject of
such license; and
(f) the sale of other assets having a fair market value not to exceed
$10,000,000 in the aggregate for any fiscal year of Details.
7.6 Limitation on Dividends. Declare or pay any dividend (other than
-----------------------
dividends payable solely in common stock of the Person making such dividend) on,
or make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any shares of any class of Capital Stock of Details or any of
its Subsidiaries or any warrants or options to purchase any such Capital Stock,
whether now or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of Details or any of its Subsidiaries (collectively, "Restricted
----------
Payments"), except that:
- --------
(a) any Subsidiary may make Restricted Payments to Details or any
Wholly Owned Subsidiary Guarantor;
(b) any payments made to the former shareholders of Holdings pursuant
to Section 1.11 of the Recapitalization Agreement;
(c) any payments on the DCI Preferred Stock on the terms in existence
on the date hereof and any payments of Deferred Payment Amounts;
(d) so long as no Default or Event of Default shall have occurred and
be continuing, Details may pay dividends to the Company to permit the
Company to pay dividends directly, or indirectly through the Company or New
Intermediate Holdco, to Holdings to permit Holdings to (i) purchase
Holdings' common stock or common stock options from present or former
officers or employees of Holdings or any of its Subsidiaries upon the
death, disability or termination of employment of such officer or employee,
provided, that the aggregate
--------
-63-
<PAGE>
amount of payments under this clause (i) shall not exceed $4,000,000 during
any fiscal year of Details and $10,000,000 during the term of this
Agreement, net, in any case, of any proceeds received by Holdings and
contributed to Details in connection with resales of any common stock or
common stock options so purchased during the relevant period and (ii) pay
management fees to Bain Capital and Bain Affiliates expressly permitted by
Section 7.10(iii); and
(e) Details may pay dividends to the Company to permit the Company,
New Intermediate Holdco or Holdings to (i) pay corporate overhead expenses
incurred in the ordinary course of business not to exceed $500,000 in any
fiscal year, (ii) pay any taxes which are due and payable by Holdings as
part of a consolidated group of which the Company, New Intermediate Holdco
and Details are members (provided that the amount of such dividends shall
--------
not exceed the lesser of (x) the actual cash tax liability of Holdings
which is then due and payable to Governmental Authorities and (y) the cash
tax liability which would be owing by the Company and its Subsidiaries to
Governmental Authorities on a stand-alone basis), (iii) pay fees and
expenses (other than to Affiliates) relating to the Company Zeros and the
New Intermediate Holdco Notes, (iv) beginning no earlier than July 2002,
pay interest in cash on the Company Zeros, (v) no earlier than December
2003 and so long as no Default or Event of Default shall have occurred and
be continuing, make all or any portion of the AHYDO Payment; provided, that
--------
(w) prior to Details making the dividend to permit all or any portion of
the AHYDO Payment to be made, Details shall provide a certificate to the
Administrative Agent, certifying that on a pro forma basis, after giving
effect to such dividend it is in compliance with all of the covenants
contained in Section 7.1, (x) the Borrower shall not be permitted to borrow
under the Revolving Credit Facility to finance such dividend and (y) the
amount of such dividend shall not exceed the lesser of (I) the then unused
Permitted Expenditure Amount plus $7,500,000 and (II) $35,000,000, and (vi)
after the date of the AHYDO Payment, pay interest in cash on the New
Intermediate Holdco Notes.
7.7 Limitation on Capital Expenditures. Make or commit to make (by
----------------------------------
way of the acquisition of securities of a Person or otherwise) any Capital
Expenditure, except Capital Expenditures of Details and its Subsidiaries in the
ordinary course of business not exceeding in any fiscal year of Details the
amount set forth below opposite such fiscal year (the "Base CapEx Amount") plus
----------------- ----
the then unused Permitted Expenditure Amount:
<TABLE>
<CAPTION>
Fiscal Year Base CapEx Amount
----------- -----------------
<S> <C>
1998 $20,000,000
1999 $20,000,000
2000 $22,500,000
2001 $25,000,000
2002 $27,500,000
2003 $30,000,000
2004 $30,000,000
2005 $32,500,000
</TABLE>
; provided, that (i) up to 50% of the Base CapEx Amount not expended in the
--------
fiscal year for which it is permitted may be carried over for expenditure in the
next succeeding fiscal year, and (ii) Capital Expenditures made during any
fiscal year shall be deemed made, first, in respect of the Base CapEx
-----
-64-
<PAGE>
Amount permitted for such fiscal year as provided above and, second, in respect
------
of any portion of such Base CapEx Amount carried over from the prior fiscal year
pursuant to subclause (i) above; provided, further, that notwithstanding the
-------- -------
foregoing, Details and its Subsidiaries may make Capital Expenditures (which
Capital Expenditures shall not be included in the amount of Capital Expenditures
permitted to be made pursuant to this Section 7.7 without giving effect to this
second proviso) with Reinvestment Deferred Amounts.
7.8 Limitation on Investments, Loans and Advances. Make any advance,
---------------------------------------------
loan, extension of credit (by way of guaranty or otherwise) or capital
contribution to, or purchase any stock, bonds, notes, debentures or other
securities of or any assets constituting all or a material part of a business
unit of, or make any other investment in, any Person, except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) Guarantee Obligations permitted by Section 7.2;
(d) loans and advances to employees of the Company and its
Subsidiaries in the ordinary course of business (including, without
limitation, for travel, entertainment and relocation expenses) in an
aggregate amount for the Company and its Subsidiaries not to exceed
$1,000,000 at any one time outstanding;
(e) (i) the Company may acquire and hold obligations of one or more
officers or other employees of the Company or its Subsidiaries in
connection with such officers' or employees' acquisition of shares of
common stock of Holdings so long as no cash is paid by the Company or any
of its Subsidiaries in connection with the acquisition of any such
obligations, (ii) the Borrower may lend up to $1,000,000 in an aggregate
principal amount at any one time outstanding to officers and employees of
the Company and its Subsidiaries on or after the date on which any such
officers and employees exercise their options to purchase common stock of
Holdings issued to them in connection with the Transaction so long as the
proceeds of such loans are promptly used by such officers and employees to
pay taxes payable by them as a result of such exercise and (iii)
investments consisting of loans by the Borrower or its Subsidiaries to
employees of the Company or its Subsidiaries, not exceeding (x) $650,000 in
the aggregate for loans made in connection with the Transaction or the
transactions contemplated by the Recapitalization Agreement and (y)
$2,000,000 for loans made after the Closing Date, in each case, in
aggregate principal amount at any time outstanding and made solely for the
purpose of funding purchases by such employees of common stock of Holdings;
(f) the Transaction;
(g) deposits made in the ordinary course of business consistent with
past practices to secure the performance of leases;
(h) investments by the Company or any of its Subsidiaries in Details
or any Person that, prior to such investment, is a Wholly Owned Subsidiary
Guarantor;
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<PAGE>
(i) Details and its Subsidiaries may acquire all or substantially
all of the Capital Stock or assets of any Person or business unit of a
Person; provided that (i) no Default or Event of Default has occurred and
--------
is continuing or would result therefrom, (ii) the Company would have been
in compliance, on a pro forma basis, with each of the financial covenants
contained in Section 7.1 if such acquisition had been made on the first day
of the most recently completed period of calculation thereof, (iii) the
aggregate consideration (including the aggregate principal amount of
Indebtedness which is incurred, assumed or guaranteed, the aggregate amount
of any deferred consideration and the fair market value of any non-cash
consideration) paid on account of all such acquisitions which are
consummated after the Closing Date does not exceed the sum of $30,000,000
and the then unused Permitted Expenditure Amount; and
(j) in addition to investments otherwise expressly permitted by this
Section 7.8, investments by Details or any of its Subsidiaries in an
aggregate amount (valued at cost, but net of returns of capital from such
investments) not to exceed during the term of this Agreement the sum of
$10,000,000 and the then unused Permitted Expenditure Amount on the date
upon which such investment is made.
7.9 Limitation on Optional Payments and Modifications of Debt
---------------------------------------------------------
Instruments, etc. (a) Make or offer to make any payment, prepayment, repurchase
- -----------------
or redemption of or otherwise defease or segregate funds with respect to the
Senior Subordinated Notes, the Company Zeros or the New Intermediate Holdco
Notes (other than scheduled interest payments required to be made in cash and
the AHYDO Payment), (b) amend, modify, waive or otherwise change, or consent or
agree to any amendment, modification, waiver or other change to, any of the
terms of the Senior Subordinated Notes, the Senior Subordinated Note Indenture,
the Company Zeros, the Company Indenture, the New Intermediate Holdco Notes or
the New Intermediate Holdco Note Purchase Agreement (other than any such
amendment, modification, waiver or other change which (i) would extend the
maturity or reduce the amount of any payment of principal thereof or which would
reduce the rate or extend the date for payment of interest thereon or (ii) is
not adverse in any respect to the interests of the Lenders in the reasonable
opinion of the Administrative Agent in its sole discretion) or (c) designate
any Indebtedness as "Designated Senior Indebtedness" for the purposes of the
Senior Subordinated Note Indenture.
7.10 Limitation on Transactions with Affiliates. Enter into any
------------------------------------------
transaction, including, without limitation, any purchase, sale, lease or
exchange of Property, the rendering of any service or the payment of any
management, advisory or similar fees, with any Affiliate (other than the
Company, Details or any Wholly Owned Subsidiary Guarantor) unless such
transaction is (a) not otherwise prohibited under this Agreement and (b) upon
fair and reasonable terms no less favorable to the Company, Details or such
Subsidiary, as the case may be, than it would obtain in a comparable arm's
length transaction with a Person which is not an Affiliate; provided, that the
--------
following transactions shall not be prohibited:
(i) the Transaction and the payment of fees to Bain Capital and/or
Bain Affiliates and to Celerity Partners I, L.P. and Celerity Management
Co. in connection with the Transaction in an aggregate amount with respect
to all such fees not to exceed $4,500,000;
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<PAGE>
(ii) in connection with any acquisition consummated pursuant to
Section 7.8(i) or (j), the payment to Bain Capital and/or Bain Affiliates
of a fee in an amount not to exceed 2% of the aggregate consideration paid
by the Company and its Subsidiaries on account of such acquisition;
(iii) so long as no Default or Event of Default shall have occurred
and is continuing, the payment, on a quarterly basis, of management fees to
Bain Capital and/or the Bain Affiliates in an aggregate amount (for all
such Persons taken together) not to exceed $375,000 in any fiscal quarter
of Details; provided that the portion of such fee which accrued but was not
--------
payable during the existence and continuance of such Default or Event of
Default shall be permitted to be paid at such time as all Defaults and
Events of Default have been cured or waived; and
(iv) the reimbursement of Bain Capital and/or the Bain Affiliates for
their reasonable out-of-pocket expenses incurred by them in connection with
performing management services to Details and its Subsidiaries.
Notwithstanding anything to the contrary contained in this Section 7.10, at no
time will the Company or any of its Subsidiaries make any payments to Bain
Capital and/or any of its Affiliates in an amount which would exceed that amount
permitted to be paid pursuant to the Senior Subordinated Note Indenture, the
Company Indenture or the New Intermediate Note Indenture at such time.
7.11 Limitation on Sales and Leasebacks. Enter into any arrangement
----------------------------------
with any Person providing for the leasing by the Company or any of its
Subsidiaries of real or personal property which has been or is to be sold or
transferred by the Company or such Subsidiary to such Person or to any other
Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of the Company or such
Subsidiary.
7.12 Limitation on Changes in Fiscal Periods. Permit the fiscal year
---------------------------------------
of the Company or either of the Borrowers to end on a day other than December 31
or change the Company's or the Borrowers' method of determining fiscal quarters.
7.13 Limitation on Negative Pledge Clauses. Enter into or suffer to
-------------------------------------
exist or become effective any agreement which prohibits or limits the ability of
the Company or any of its Subsidiaries to create, incur, assume or suffer to
exist any Lien upon any of its Property or revenues, whether now owned or
hereafter acquired, other than (a) this Agreement and the other Loan Documents
and (b) any agreements governing any purchase money Liens or Capital Lease
Obligations otherwise permitted hereby (in which case, any prohibition or
limitation shall only be effective against the assets financed thereby).
7.14 Limitation on Restrictions on Subsidiary Distributions. Enter
------------------------------------------------------
into or suffer to exist or become effective any consensual encumbrance or
restriction on the ability of any Subsidiary of Details to (a) pay dividends or
make any other distributions in respect of any Capital Stock of such Subsidiary
held by, or pay any Indebtedness owed to, Details or any other Subsidiary of
Details, (b) make loans or advances to Details or any other Subsidiary of
Details or (c) transfer any of its assets to Details or any other Subsidiary of
Details, except for such encumbrances or restrictions existing under or by
reason of (i) any restrictions existing under the Loan Documents and (ii) any
restrictions with
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respect to a Subsidiary imposed pursuant to an agreement which has been entered
into in connection with the Disposition of all or substantially all of the
Capital Stock or assets of such Subsidiary.
7.15 Limitation on Lines of Business. Enter into any business,
-------------------------------
either directly or through any Subsidiary, except for those businesses in which
the Borrowers and their Subsidiaries are engaged on the date of this Agreement
or which are reasonably related thereto.
7.16 Limitation on Amendments to Transaction Documents. (a) Amend,
-------------------------------------------------
supplement or otherwise modify (pursuant to a waiver or otherwise) the terms and
conditions of the Recapitalization Agreement or any of the Transaction
Documents.
7.17 Limitation on Activities of the Company. In the case of the
---------------------------------------
Company and notwithstanding anything to the contrary in this Agreement or any
other Loan Document, (a) conduct, transact or otherwise engage in, or commit to
conduct, transact or otherwise engage in, any business or operations other than
those incidental to its ownership of the Capital Stock of Details and the
transitory ownership of the Capital Stock of DCI, (b) incur, create, assume or
suffer to exist any Indebtedness or other liabilities or financial obligations,
other than (i) nonconsensual obligations imposed by operation of law, (ii)
pursuant to the Loan Documents to which it is a party, (iii) the Company Zeros
and the Company Indenture and (iv) obligations with respect to its Capital
Stock, or (c) own, lease, manage or otherwise operate any properties or assets
(including cash and Cash Equivalents), other than Capital Stock of Details and
the transitory ownership of the Capital Stock of DCI and cash received in
connection with dividends made by Details in accordance with Section 7.6 pending
application in the manner contemplated by said Section.
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrowers shall fail to pay any principal of any Loan or
Reimbursement Obligation when due in accordance with the terms hereof; or
the Borrowers shall fail to pay any interest on any Loan or Reimbursement
Obligation, or any other amount payable hereunder or under any other Loan
Document, within three days after any such interest or other amount becomes
due in accordance with the terms hereof; or
(b) Any representation or warranty made or deemed made by any Loan
Party herein or in any other Loan Document or which is contained in any
certificate, document or financial or other statement furnished by it at
any time under or in connection with this Agreement or any such other Loan
Document shall prove to have been inaccurate in any material respect on or
as of the date made or deemed made; or
(c) Any Loan Party shall default in the observance or performance of
any agreement contained in clause (i) or (ii) of Section 6.4(a) (with
respect to the Company and the Borrowers only), Section 6.12 or in Section
7; or
(d) Any Loan Party shall default in the observance or performance of
any other agreement contained in this Agreement or any other Loan Document
(other than as provided
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in paragraphs (a) through (c) of this Section), and (to the extent that
such default is susceptible of remedy) such default shall continue
unremedied for a period of 30 days after the earlier of (x) the date upon
which the Borrowers knows or should reasonably be expected to know of the
existence of such default or (y) the date upon which either of the
Borrowers receives notice of such event from the Administrative Agent or
any Lender; or
(e) Holdings or any of its Subsidiaries shall (i) default in making
any payment of any principal of any Indebtedness (including, without
limitation, any Guarantee Obligation, but excluding the Loans) on the
scheduled or original due date with respect thereto; or (ii) default in
making any payment of any interest on any such Indebtedness beyond the
period of grace, if any, provided in the instrument or agreement under
which such Indebtedness was created; or (iii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause,
or to permit the holder or beneficiary of such Indebtedness (or a trustee
or agent on behalf of such holder or beneficiary) to cause, with the giving
of notice if required, such Indebtedness to become due prior to its stated
maturity or (in the case of any such Indebtedness constituting a Guarantee
Obligation) to become payable; provided, that a default, event or condition
--------
described in clause (i), (ii) or (iii) of this paragraph (e) shall not at
any time constitute an Event of Default under this Agreement unless, at
such time, one or more defaults, events or conditions of the type described
in clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred
and be continuing with respect to Indebtedness the outstanding principal
amount of which exceeds in the aggregate $2,000,000; or
(f) (i) Holdings or any of its Material Subsidiaries shall commence
any case, proceeding or other action (A) under any existing or future law
of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order
for relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with
respect to it or its debts, or (B) seeking appointment of a receiver,
trustee, custodian, conservator or other similar official for it or for all
or any substantial part of its assets, or Holdings or any of its Material
Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against Holdings or any of its
Material Subsidiaries any case, proceeding or other action of a nature
referred to in clause (i) above which (A) results in the entry of an order
for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (iii)
there shall be commenced against Holdings or any of its Material
Subsidiaries any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all
or any substantial part of its assets which results in the entry of an
order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof; or
(iv) Holdings or any of its Material Subsidiaries shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence
in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v)
Holdings or any of its Material Subsidiaries shall generally not, or shall
be unable to, or shall admit in writing its inability to, pay its debts as
they become due; or
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(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of either
of the Borrowers or any Commonly Controlled Entity, (iii) a Reportable
Event shall occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or commencement
of proceedings or appointment of a trustee is, in the reasonable opinion of
the Required Lenders, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) either of the Borrowers or
any Commonly Controlled Entity shall, or in the reasonable opinion of the
Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan or (vi) any other event or condition shall occur or exist with respect
to a Plan; and in each case in clauses (i) through (vi) above, such event
or condition, together with all other such events or conditions, if any,
could, in the sole judgment of the Required Lenders, reasonably be expected
to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against the
Company or any of its Subsidiaries involving in the aggregate a liability
(not paid or fully covered by insurance) of $2,000,000 or more, and all
such judgments or decrees shall not have been vacated, discharged, stayed
or bonded pending appeal within 30 days from the entry thereof; or
(i) Any of the Security Documents shall cease, for any reason, to be
in full force and effect, or any Loan Party or any Affiliate of any Loan
Party shall so assert, or any Lien created by any of the Security Documents
shall cease to be enforceable and of the same effect and priority purported
to be created thereby; or
(j) The guarantee contained in Section 2 of the Guarantee and
Collateral Agreement shall cease, for any reason, to be in full force and
effect or any Loan Party or any Affiliate of any Loan Party shall so
assert; or
(k) A Change of Control or a Specified Change of Control shall occur;
or
(l) (i) After the Second Closing Date, other than with respect to the
DCI Preferred Stock, Details shall cease to own directly 100% on a fully
diluted basis of the economic and voting interest in DCI's capital stock,
free of Liens except Liens created by the Guarantee and Collateral
Agreement, (ii) the Company shall cease to own directly 100% on a fully
diluted basis of the economic and voting interest in Details's capital
stock, free of Liens except Liens created by the Guarantee and Collateral
Agreement, (iii) New Intermediate Holdco shall cease to own directly 100%
on a fully diluted basis of the economic and voting interest in the
Company's capital stock, free of Liens or (iv) Holdings shall cease to own
directly 100% on a fully diluted basis of the economic and voting interest
in New Intermediate Holdco's capital stock, free of Liens; or
(m) Holdings or New Intermediate Holdco shall (a) conduct, transact
or otherwise engage in, or commit to conduct, transact or otherwise engage
in, any business or operations
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other than those incidental to its ownership of the Capital Stock of New
Intermediate Holdco or the Company, as the case may be and, in the case of
New Intermediate Holdco, the ownership of the Capital Stock of DCI and the
making of the loan referred to in Section 5.1(b)(iii) prior to the Second
Closing Date, (b) incur, create, assume or suffer to exist any Indebtedness
or other liabilities or financial obligations, other than (i) nonconsensual
obligations imposed by operation of law, (ii) in the case of New
Intermediate Holdco, the New Intermediate Holdco Notes, (iii) obligations
with respect to its Capital Stock, (iv) in the case of Holdings or New
Intermediate Holdco, Indebtedness incurred to finance AHYDO Payment and (v)
the obligations of Holdings under its cash bonus plan on terms in existence
on the date hereof, or (c) own, lease, manage or otherwise operate any
properties or assets (including cash and Cash Equivalents), other than
Capital Stock of New Intermediate Holdco or the Company, as the case may
be, or, in the case of New Intermediate Holdco, the Capital Stock of DCI
prior to the Second Closing Date, and cash received directly or indirectly
in connection with dividends paid by Details in accordance with Section 7.6
pending application in the manner contemplated by said Section; or
(n) The Senior Subordinated Notes or the guarantees thereof shall
cease, for any reason, to be validly subordinated to the Obligations or the
obligations of the Subsidiary Guarantors under the Guarantee and Collateral
Agreement, as the case may be, as provided in the Senior Subordinated Note
Indenture, or any Loan Party, any Affiliate of any Loan Party, the trustee
in respect of the Senior Subordinated Notes or the holders of at least 25%
in aggregate principal amount of the Senior Subordinated Notes shall so
assert;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to either of the
Borrowers, automatically the Commitments shall immediately terminate and the
Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement and the other Loan Documents (including, without
limitation, all amounts of L/C Obligations, whether or not the beneficiaries of
the then outstanding Letters of Credit shall have presented the documents
required thereunder) shall immediately become due and payable, and (B) if such
event is any other Event of Default, either of both of the following actions may
be taken: (i) with the consent of the Majority Revolving Credit Facility
Lenders, the Administrative Agent may, or upon the request of the Majority
Revolving Credit Facility Lenders, the Administrative Agent shall, by notice to
the Borrowers declare the Revolving Credit Commitments to be terminated
forthwith, whereupon the Revolving Credit Commitments shall immediately
terminate; and (ii) with the consent of the Required Lenders, the Administrative
Agent may, or upon the request of the Required Lenders, the Administrative Agent
shall, by notice to the Borrowers, declare the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement and the other
Loan Documents (including, without limitation, all amounts of L/C Obligations,
whether or not the beneficiaries of the then outstanding Letters of Credit shall
have presented the documents required thereunder) to be due and payable
forthwith, whereupon the same shall immediately become due and payable. With
respect to all Letters of Credit with respect to which presentment for honor
shall not have occurred at the time of an acceleration pursuant to this
paragraph, the Borrowers shall at such time deposit in a cash collateral account
opened by the Administrative Agent an amount equal to the aggregate then undrawn
and unexpired amount of such Letters of Credit. Amounts held in such cash
collateral account shall be applied by the Administrative Agent to the payment
of drafts drawn under such Letters of Credit, and the unused portion thereof
after all such Letters of Credit shall have expired or been fully drawn upon, if
any, shall be applied to
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repay other obligations of the Borrowers hereunder and under the other Loan
Documents. After all such Letters of Credit shall have expired or been fully
drawn upon, all Reimbursement Obligations shall have been satisfied and all
other obligations of the Borrowers hereunder and under the other Loan Documents
shall have been paid in full, the balance, if any, in such cash collateral
account shall be returned to the Borrowers (or such other Person as may be
lawfully entitled thereto). Except as expressly provided above in this Section,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived by the Borrowers.
SECTION 9. THE ADMINISTRATIVE AGENT
9.1 Appointment. Each Lender hereby irrevocably designates and
-----------
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent.
9.2 Delegation of Duties. The Administrative Agent may execute any
--------------------
of its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys in-fact selected by it with reasonable care.
9.3 Exculpatory Provisions. Neither the Administrative Agent nor any
----------------------
of its officers, directors, employees, agents, attorneys-in-fact or affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or any other Loan
Document (except to the extent that any of the foregoing result from 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 Loan Party or any officer thereof contained in this
Agreement or any other Loan Document or in any certificate, report, statement or
other document referred to or provided for in, or received by the Administrative
Agent under or in connection with, this Agreement or any other Loan Document or
for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document or for any failure of
any Loan Party a party thereto to perform its obligations hereunder or
thereunder. The Administrative Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of any Loan Party.
9.4 Reliance by Administrative Agent. The Administrative Agent shall
--------------------------------
be entitled to rely, and shall be fully protected in relying, upon any
instrument, writing, resolution, notice, consent, certificate, affidavit,
letter, telecopy, telex or teletype message, statement, order or other document
or
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conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Company or the
Borrowers), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Required Lenders (or, if so specified by this Agreement, all Lenders) as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Administrative
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement and the other Loan Documents in accordance with a
request of the Required Lenders (or, if so specified by this Agreement, all
Lenders), and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all future holders of the
Loans.
9.5 Notice of Default. The Administrative Agent shall not be deemed
-----------------
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender, the
Company or either of the Borrowers referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that the Administrative Agent receives such a notice,
the Administrative Agent shall give notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders (or, if
so specified by this Agreement, all Lenders); provided that unless and until the
--------
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
9.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly
----------------------------------------
acknowledges that neither the Administrative Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by the Administrative Agent
hereinafter taken, including any review of the affairs of a Loan Party or any
affiliate of a Loan Party, shall be deemed to constitute any representation or
warranty by the Administrative Agent to any Lender. Each Lender represents to
the Administrative Agent that it has, independently and without reliance upon
the Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Loan Parties and their affiliates and made
its own decision to make its Loans hereunder and enter into this Agreement.
Each Lender also represents that it will, independently and without reliance
upon the Administrative Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Loan Parties and their affiliates. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business,
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operations, property, condition (financial or otherwise), prospects or
creditworthiness of any Loan Party or any affiliate of a Loan Party which may
come into the possession of the Administrative Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates.
9.7 Indemnification. The Lenders agree to indemnify the
---------------
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Company or the Borrowers and without limiting the obligation of the Company
or the Borrowers to do so), ratably according to their respective Revolving
Credit Percentages, Tranche A Term Loan Percentages and Tranche B Term Loan
Percentages in effect on the date on which indemnification is sought under this
Section 9.7 (or, if indemnification is sought after the date upon which the
Commitments shall have terminated and the Loans shall have been paid in full,
ratably in accordance with such percentages immediately prior to such date),
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Loans) be imposed on, incurred by or asserted
against the Administrative Agent in any way relating to or arising out of, the
Commitments, this Agreement, any of the other Loan Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided
--------
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements which result from the Administrative Agent's
gross negligence or willful misconduct. The Administrative Agent shall have the
right to deduct any amount owed to it by any Lender under this Section from any
payment made by it to such Lender hereunder. The agreements in this Section 9.7
shall survive the payment of the Loans and all other amounts payable hereunder.
9.8 Administrative Agent in Its Individual Capacity. The
-----------------------------------------------
Administrative Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with any Loan Party as though the
Administrative Agent was not the Administrative Agent. With respect to its
Loans made or renewed by it and with respect to any Letter of Credit issued or
participated in by it, the Administrative Agent shall have the same rights and
powers under this Agreement and the other Loan Documents as any Lender and may
exercise the same as though it were not the Administrative Agent, and the terms
"Lender" and "Lenders" shall include the Administrative Agent in its individual
capacity.
9.9 Successor Administrative Agent. The Administrative Agent may
------------------------------
resign as Administrative Agent upon 10 days' notice to the Lenders and Details.
If the Administrative Agent shall resign as Administrative Agent under this
Agreement and the other Loan Documents, then the Required Lenders shall appoint
from among the Lenders a successor agent for the Lenders, which successor agent
shall (unless an Event of Default under Section 8(a) or Section 8(f) with
respect to either of the Borrowers shall have occurred and be continuing) be
approved by Details (which approval shall not be unreasonably withheld or
delayed), whereupon such successor agent shall succeed to the rights, powers and
duties of the Administrative Agent, and the term "Administrative Agent" shall
mean such successor agent effective upon such appointment and approval, and the
former Administrative Agent's rights, powers and duties as Administrative Agent
shall be terminated, without any other or further act or deed on the part of
such former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. If no successor agent has accepted appointment as
Administrative Agent by the date that is 30 days following a retiring
Administrative Agent's notice of
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resignation, the retiring Administrative Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall assume and perform all of the
duties of the Administrative Agent hereunder until such time, if any, as the
Required Lenders appoint a successor agent as provided for above. After any
retiring Administrative Agent's resignation as Administrative Agent, the
provisions of this Section 9 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Administrative Agent under this
Agreement and the other Loan Documents.
9.10 Authorization to Release Liens. The Administrative Agent is
------------------------------
hereby irrevocably authorized by each of the Lenders to release any Lien
covering any Property of the Company or any of its Subsidiaries that is the
subject of a Disposition which is permitted by this Agreement or which has been
consented to in accordance with Section 11.1.
SECTION 10. GUARANTEE
10.1 Guarantee. In order to induce the Administrative Agent and the
---------
Lenders to execute and deliver this Agreement and to make or maintain the Loans
hereunder, and in consideration thereof, from and after the Second Closing Date
Details hereby unconditionally and irrevocably guarantees to the Administrative
Agent, for the ratable benefit of the Lenders, the prompt and complete payment
and performance by DCI when due (whether at stated maturity, by acceleration or
otherwise) of the DCI Obligations, and Details further agrees to pay any and all
expenses (including, without limitation, all reasonable fees, charges and
disbursements of counsel) that may be paid or incurred by the Administrative
Agent or by the Lenders in enforcing, or obtaining advice of counsel in respect
of, any of their rights under the guarantee contained in this Section 10. The
guarantee contained in this Section 10, subject to Section 10.5, shall remain in
full force and effect until the DCI Obligations are paid in full, the
Commitments are terminated and no Letters of Credit are outstanding,
notwithstanding that from time to time prior thereto DCI may be free from any
DCI Obligations.
Details agrees that whenever, at any time, or from time to time, it
shall make any payment to the Administrative Agent or any Lender on account of
its liability under this Section 10, it will notify the Administrative Agent and
such Lender in writing that such payment is made under the guarantee contained
in this Section 10 for such purpose. No payment or payments made by DCI or any
other Person or received or collected by the Administrative Agent or any Lender
from DCI or any other Person by virtue of any action or proceeding or any setoff
or appropriation or application, at any time or from time to time, in reduction
of or in payment of the DCI Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of Details under this Section 10
which, notwithstanding any such payment or payments, shall remain liable for the
DCI Obligations until, subject to Section 10.5, the DCI Obligations are paid in
full, the Commitments are terminated and no Letters of Credit are outstanding.
10.2 No Subrogation, Contribution, Reimbursement or Indemnity.
--------------------------------------------------------
Notwithstanding anything to the contrary in this Section 10, Details hereby
irrevocably waives all rights that may have arisen in connection with the
guarantee contained in this Section 10 to be subrogated to any of the rights
(whether contractual, under the United States Bankruptcy Code (or similar action
under any successor law or under any comparable law), including Section 509
thereof, under common law or otherwise) of the Administrative Agent or any
Lender against DCI or against the Administrative
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Agent or any Lender for the payment of the DCI Obligations, until the DCI
Obligations shall have been paid in full, no Letters of Credit shall be
outstanding and the Commitments shall have been terminated. Details hereby
further irrevocably waives all contractual, common law, statutory and other
rights of reimbursement, contribution, exoneration or indemnity (or any similar
right) from or against DCI or any other Person that may have arisen in
connection with the guarantee contained in this Section 10, until the DCI
Obligations shall have been paid in full, no Letters of Credit shall be
outstanding and the Commitments shall have been terminated. So long as the DCI
Obligations remain outstanding, if any amount shall be paid by or on behalf of
DCI to Details on account of any of the rights waived in this Section 10.2, such
amount shall be held by Details in trust, segregated from other funds of
Details, and shall, forthwith upon receipt by Details, be turned over to the
Administrative Agent in the exact form received by Details (duly indorsed by
Details to the Administrative Agent, if required), to be applied against the DCI
Obligations, whether matured or unmatured, in such order as the Administrative
Agent may determine. The provisions of this Section 10.2 shall survive the term
of the guarantee contained in this Section 10 and the payment in full of the DCI
Obligations and the termination of the Commitments.
10.3 Amendments, etc. with respect to the DCI Obligations. Details
----------------------------------------------------
shall remain obligated under this Section 10 notwithstanding that, without any
reservation of rights against Details, and without notice to or further assent
by Details, any demand for payment of or reduction in the principal amount of
any of the DCI Obligations made by the Administrative Agent or any Lender may be
rescinded by the Administrative Agent or such Lender, and any of the DCI
Obligations continued, and the DCI Obligations, or the liability of any other
party upon or for any part thereof, or any collateral security or guarantee
therefor or right of offset with respect thereto, may, from time to time, in
whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by the Administrative Agent or any
Lender, and this Agreement, any other Loan Document, and any other documents
executed and delivered in connection therewith may be amended, modified,
supplemented or terminated, in whole or in part, as the Lenders (or the Required
Lenders, as the case may be) may deem advisable from time to time, and any
collateral security, guarantee or right of offset at any time held by the
Administrative Agent or any Lender for the payment of the DCI Obligations may be
sold, exchanged, waived, surrendered or released. Neither the Administrative
Agent nor any Lender shall have any obligation to protect, secure, perfect or
insure any Lien at any time held by it as security for the DCI Obligations or
for the guarantee contained in this Section 10 or any property subject thereto.
10.4 Guarantee Absolute and Unconditional. Details waives any and
------------------------------------
all notice of the creation, renewal, extension or accrual of any of the DCI
Obligations and notice of or proof of reliance by the Administrative Agent or
any Lender upon the guarantee contained in this Section 10 or acceptance of the
guarantee contained in this Section 10; the DCI Obligations, and any of them,
shall conclusively be deemed to have been created, contracted or incurred, or
renewed, extended, amended or waived, in reliance upon the guarantee contained
in this Section 10; and all dealings between DCI or Details, on the one hand,
and the Administrative Agent and the Lenders, on the other, shall likewise be
conclusively presumed to have been had or consummated in reliance upon the
guarantee contained in this Section 10. Details waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon DCI
or Details with respect to the DCI Obligations. The guarantee contained in this
Section 10 shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity or enforceability of
this Agreement or any other Loan Document, any of the DCI Obligations or any
collateral security therefor or guarantee or right of
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offset with respect thereto at any time or from time to time held by the
Administrative Agent or any Lender, (b) any defense, setoff or counterclaim
(other than a defense of payment or performance) that may at any time be
available to or be asserted by DCI against the Administrative Agent or any
Lender, or (c) any other circumstance whatsoever (with or without notice to or
knowledge of DCI or Details) that constitutes, or might be construed to
constitute, an equitable or legal discharge of DCI for the DCI Obligations, or
of Details under the guarantee contained in this Section 10, in bankruptcy or in
any other instance. When the Administrative Agent or any Lender is pursuing its
rights and remedies under this Section 10 against Details, the Administrative
Agent or any Lender may, but shall be under no obligation to, pursue such rights
and remedies as it may have against DCI or any other Person or against any
collateral security or guarantee for the DCI Obligations or any right of offset
with respect thereto, and any failure by the Administrative Agent or any Lender
to pursue such other rights or remedies or to collect any payments from DCI or
any such other Person or to realize upon any such collateral security or
guarantee or to exercise any such right of offset, or any release of DCI or any
such other Person or of any such collateral security, guarantee or right of
offset, shall not relieve Details of any liability under this Section 10, and
shall not impair or affect the rights and remedies, whether express, implied or
available as a matter of law, of the Administrative Agent and the Lenders
against Details.
10.5 Reinstatement. The guarantee contained in this Section 10 shall
-------------
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the DCI Obligations is rescinded or must
otherwise be restored or returned by the Administrative Agent or any Lender upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of DCI or
upon or as a result of the appointment of a receiver, intervenor or conservator
of, or trustee or similar officer for, DCI or any substantial part of its
property, or otherwise, all as though such payments had not been made.
10.6 Payments. Details hereby agrees that any payments in respect of
--------
the DCI Obligations pursuant to this Section 10 will be paid to the
Administrative Agent without setoff or counterclaim in Dollars at its office
specified in Section 11.2.
SECTION 11. MISCELLANEOUS
11.1 Amendments and Waivers. Neither this Agreement, any other Loan
----------------------
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 11.1. The
Required Lenders and each Loan Party party to the relevant Loan Document may,
or, with the written consent of the Required Lenders, the Administrative Agent
and each Loan Party party to the relevant Loan Document may, from time to time,
(a) enter into written amendments, supplements or modifications hereto and to
the other Loan Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on such
terms and conditions as the Required Lenders or the Administrative Agent, as the
case may be, may specify in such instrument, any of the requirements of this
Agreement or the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
-------- -------
supplement or modification shall (i) forgive or reduce the principal amount or
extend the final scheduled date of maturity of any Loan, extend the scheduled
date of any amortization payment in respect of any Term Loan, reduce the stated
rate of any interest, fee or letter of credit commission payable hereunder or
extend the scheduled date of any payment
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thereof, or increase the amount or extend the expiration date of any Lender's
Revolving Credit Commitment, in each case without the consent of each Lender
directly affected thereby; (ii) amend, modify or waive any provision of this
Section 11.1 or reduce any percentage specified in the definition of Required
Lenders or Required Prepayment Lenders, consent to the assignment or transfer by
either of the Borrowers of any of its rights and obligations under this
Agreement and the other Loan Documents, release all or substantially all of the
Collateral or release all or substantially all of the Guarantors from their
obligations under the Guarantee and Collateral Agreement, in each case without
the written consent of all Lenders; (iii) reduce the percentage specified in the
definition of Majority Facility Lenders without the written consent of all
Lenders under each affected Facility; (iv) amend, modify or waive any provision
of Section 9 without the written consent of the Administrative Agent; (v) amend,
modify or waive any provision of Section 2.6 or 2.7 without the written consent
of the Swing Line Lender or (vi) amend, modify or waive any provision of Section
3 without the written consent of the Issuing Lender. Any such waiver and any
such amendment, supplement or modification shall apply equally to each of the
Lenders and shall be binding upon the Loan Parties, the Lenders, the
Administrative Agent and all future holders of the Loans. In the case of any
waiver, the Loan Parties, the Lenders and the Administrative Agent shall be
restored to their former position and rights hereunder and under the other Loan
Documents, and any Default or Event of Default waived shall be deemed to be
cured and not continuing; but no such waiver shall extend to any subsequent or
other Default or Event of Default, or impair any right consequent thereon.
11.2 Notices. All notices, requests and demands to or upon the
-------
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows in the case of the Company, the Borrowers and the
Administrative Agent, and as set forth in an administrative questionnaire
delivered to the Administrative Agent in the case of the Lenders, or to such
other address as may be hereafter notified by the respective parties hereto:
The Company and the Borrowers: Details, Inc.
1231 Simon Circle
Anaheim, California 92806
Attention: Chief Financial Officer
Telecopy: (714) 630-9438
Dynamic Circuits, Inc.
1831 Tarob Court
Milpitas, California 95035
Attention: Chief Financial Officer
Telecopy: (408) 935-9104
with copies to: Bain Capital, Inc.
Two Copley Plaza
6th Floor
Boston, Massachusetts 02116
Attention: David Dominik/Prescott Ashe/
Steve Zide
Telecopy: (617) 572-3274
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Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Philip J. Smith
Telecopy: (617) 951-7050
The Administrative Agent: The Chase Manhattan Bank
c/o The Loan and Agency Services Group
1 Chase Manhattan Plaza - 8th Floor
New York, New York, 10081
Attention: Janet Belden
Telecopy: (212) 552-5658
with a copy to: The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: John Huber
Telecopy: (212) 270-4584
provided that any notice, request or demand to or upon the Administrative Agent
- --------
or the Lenders shall not be effective until received.
11.3 No Waiver; Cumulative Remedies. No failure to exercise and no
------------------------------
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
11.4 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans hereunder.
11.5 Payment of Expenses and Taxes. Each of the Borrowers agrees (a)
-----------------------------
to pay or reimburse the Administrative Agent for all its out-of-pocket costs and
expenses incurred in connection with the development, preparation and execution
of, and any amendment, supplement or modification to, this Agreement and the
other Loan Documents and any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Administrative Agent, (b) to pay or
reimburse each Lender and the Administrative Agent for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the other Loan Documents and any such other
documents, including, without limitation, the fees and disbursements of counsel
(including the allocated fees and expenses of in-house counsel) to each Lender
and of counsel to the Administrative Agent, (c) to pay, indemnify, and hold each
Lender and the Administrative Agent harmless from, any and all recording and
filing fees and any
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and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or consummation or
administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the other Loan Documents and any such other documents, and (d)
to pay, indemnify, and hold each Lender and the Administrative Agent and their
respective officers, directors, employees, affiliates, agents and controlling
persons (each, an "indemnitee") harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Agreement, the other Loan Documents and any such other documents, including,
without limitation, any of the foregoing relating to the use of proceeds of the
Loans or the violation of, noncompliance with or liability under, any
Environmental Law applicable to the operations of the Company or any of its
Subsidiaries or any of the Properties (all the foregoing in this clause (d),
collectively, the "indemnified liabilities"), provided, that the Borrowers shall
--------
have no obligation hereunder to any indemnitee with respect to indemnified
liabilities to the extent such indemnified liabilities result from the gross
negligence or willful misconduct of such indemnitee. The agreements in this
Section 11.5 shall survive repayment of the Loans and all other amounts payable
hereunder.
11.6 Successors and Assigns; Participations and Assignments. (a)
------------------------------------------------------
This Agreement shall be binding upon and inure to the benefit of the Company,
the Borrowers, the Lenders, the Administrative Agent, all future holders of the
Loans and their respective successors and assigns, except that neither of the
Borrowers may assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of each Lender.
(b) Any Lender may, without the consent of the Company or either of
the Borrowers, in accordance with applicable law, at any time sell to one or
more banks, financial institutions or other entities (each, a "Participant")
-----------
participating interests in any Loan owing to such Lender, any Commitment of such
Lender or any other interest of such Lender hereunder and under the other Loan
Documents. In the event of any such sale by a Lender of a participating
interest to a Participant, such Lender's obligations under this Agreement to the
other parties to this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall remain the
holder of any such Loan for all purposes under this Agreement and the other Loan
Documents, and the Borrowers and the Administrative Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. In no event
shall any Participant under any such participation have any right to approve any
amendment or waiver of any provision of any Loan Document, or any consent to any
departure by any Loan Party therefrom, except to the extent that such amendment,
waiver or consent would reduce the principal of, or interest on, the Loans or
any fees payable hereunder, or postpone the date of the final maturity of the
Loans, in each case to the extent subject to such participation. The Borrowers
agree that if amounts outstanding under this Agreement and the Loans are due or
unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall, to the maximum
extent permitted by applicable law, be deemed to have the right of setoff in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement, provided that, in purchasing
--------
such participating interest, such Participant shall be deemed to have agreed to
share with the Lenders the
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proceeds thereof as provided in Section 11.7(a) as fully as if it were a Lender
hereunder. The Borrowers also agree that each Participant shall be entitled to
the benefits of Sections 2.18, 2.19 and 2.20 with respect to its participation
in the Commitments and the Loans outstanding from time to time as if it was a
Lender; provided that, in the case of Section 2.19, such Participant shall have
--------
complied with the requirements of said Section and provided, further, that no
-------- -------
Participant shall be entitled to receive any greater amount pursuant to any such
Section than the transferor Lender would have been entitled to receive in
respect of the amount of the participation transferred by such transferor Lender
to such Participant had no such transfer occurred.
(c) Any Lender (an "Assignor") may, in accordance with applicable
--------
law, at any time and from time to time assign to any Lender or any affiliate or
Approved Fund thereof or, with the consent of Details and the Administrative
Agent (which, in each case, shall not be unreasonably withheld or delayed), to
an additional bank, financial institution or other entity (an "Assignee") all or
--------
any part of its rights and obligations under this Agreement pursuant to an
Assignment and Acceptance, substantially in the form of Exhibit D, executed by
such Assignee and such Assignor (and, in the case of an Assignee that is not
then a Lender or an affiliate or Approved Fund thereof, by Details and the
Administrative Agent) and delivered to the Administrative Agent for its
acceptance and recording in the Register; provided that no such assignment to an
--------
Assignee (other than any Lender or any affiliate or Approved Fund thereof) shall
be in an aggregate principal amount of less than $5,000,000 (other than in the
case of an assignment of all of a Lender's interests under this Agreement),
unless otherwise agreed by Details and the Administrative Agent. Any such
assignment need not be ratable as among the Facilities. Upon such execution,
delivery, acceptance and recording, from and after the effective date determined
pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be
a party hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a Lender hereunder with a Commitment and/or
Loans as set forth therein, and (y) the Assignor thereunder shall, to the extent
provided in such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all of an Assignor's rights and obligations under this Agreement, such assigning
Lender shall cease to be a party hereto). Notwithstanding any provision of this
Section 11.6, the consent of Details shall not be required, and, unless
requested by the Assignee and/or the Assignor, new Notes shall not be required
to be executed and delivered by the Borrowers, for any assignment which occurs
at any time when any of the events described in Section 8 shall have occurred
and be continuing.
(d) The Administrative Agent shall maintain at its address referred
to in Section 11.2 a copy of each Assignment and Acceptance delivered to it and
a register (the "Register") for the recordation of the names and addresses of
--------
the Lenders and the Commitments of, and the principal amount of the Loans owing
to, each Lender from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrowers, each other Loan
Party, the Administrative Agent and the Lenders shall treat each Person whose
name is recorded in the Register as the owner of the Loan recorded therein for
all purposes of this Agreement.
(e) Upon its receipt of an Assignment and Acceptance executed by an
Assignor and an Assignee (and, in the case of an Assignee that is not then a
Lender or an affiliate or Approved Fund thereof, by Details and the
Administrative Agent) together with payment to the Administrative Agent of a
registration and processing fee of $3,500, the Administrative Agent shall (i)
promptly accept such Assignment and Acceptance and (ii) record the information
contained therein in the Register on the
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effective date determined pursuant thereto; provided however, that no such fee
-------- -------
shall be payable in the case of an assignment to another Lender or an Affiliate
or Approved Fund of a Lender; and provided further that, in the case of
-------- -------
contemporaneous assignments by a Lender to more than one fund managed by the
same investment advisor (which funds are not then Lenders hereunder), only a
single $3,500 such fee shall be payable for all such contemporaneous
assignments.
(f) (i) To the extent requested by any Lender, the Loans made by
such Lender shall be evidenced by a Note issued by the Borrowers, substantially
in the form of Exhibit F-1, F-2 or F-3, as the case may be, payable to the order
of such Lender (or, in the case of any Alternative Note, payable to such Lender
or its registered assigns). Each Lender is hereby authorized to record, on the
schedule annexed to and constituting a part of the relevant Note, information
regarding the relevant Loans made by such Lender, and any such recordation shall
constitute prima facie evidence of the accuracy of the information so recorded,
----- -----
provided that the failure to make any such recordation or any error in such
- --------
recordation shall not affect the Borrowers' obligations hereunder or under any
Note. On or prior to the effective date of an Assignment and Acceptance, the
Borrowers, at their own expense, shall, to the extent requested by the Assignee,
execute and deliver to the Administrative Agent, in exchange for the relevant
Notes, new Notes to the order of the Assignee and, if applicable, the Assignor.
Such new Notes shall be dated the Closing Date.
(ii) Any Non-U.S. Lender that could become completely exempt from
withholding of any tax, assessment or other charge or levy imposed by or on
behalf of the United States or any taxing authority thereof ("U.S. Taxes") in
----------
respect of payment of any Obligations due to such Non-U.S. Lender under this
Agreement if the Obligations were in registered form for U.S. federal income tax
purposes may request the Borrowers (through the Administrative Agent), and the
Borrowers agree thereupon, to exchange any promissory note(s) evidencing such
Obligations for promissory note(s) substantially in the form of Exhibit F-3
(each, an "Alternative Note"). Alternative Notes may not be exchanged for
----------------
promissory notes that are not Alternative Notes. Each Non-U.S. Lender that
holds Alternative Note(s) (an "Alternative Noteholder") (or, if such Alternative
----------------------
Noteholder is not the beneficial owner thereof, such beneficial owner) shall
deliver to the Borrowers prior to or at the time such Non-U.S. Lender becomes an
Alternative Noteholder each of the forms and certifications required by Section
2.19(b). An Alternative Note and the Obligation(s) evidenced thereby may be
assigned or otherwise transferred in whole or in part only by registration of
such assignment or transfer of such Alternative Note and the Obligation(s)
evidenced thereby on the Register (and each Alternative Note shall expressly so
provide). Any assignment or transfer of all or part of such Obligation(s) and
the Alternative Note(s) evidencing the same shall be registered on the Register
only upon surrender for registration of assignment or transfer of the
Alternative Note(s) evidencing such Obligation(s), duly endorsed by (or
accompanied by a written instrument of assignment or transfer duly executed by)
the Alternative Noteholder thereof, and thereupon one or more new Alternative
Note(s) in the same aggregate principal amount shall be issued to the designated
Assignee(s). No assignment of an Alternative Note and the Obligations evidenced
thereby shall be effective unless it has been recorded in the Register.
(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this Section 11.6 concerning assignments of
Loans and Notes relate only to absolute assignments and that such provisions do
not prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law.
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11.7 Adjustments; Set-off. (a) Except to the extent that this
--------------------
Agreement provides for payments to be allocated to the Lenders under a
particular Facility, if any Lender (a "Benefitted Lender") shall at any time
-----------------
receive any payment of all or part of its Loans or the Reimbursement Obligations
owing to it, or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Section 8(f), or otherwise), in a
greater proportion than any such payment to or collateral received by any other
Lender, if any, in respect of such other Lender's Loans or the Reimbursement
Obligations owing to such other Lender, or interest thereon, such Benefitted
Lender shall purchase for cash from the other Lenders a participating interest
in such portion of each such other Lender's Loan and/or of the Reimbursement
Obligations owing to each such other Lender, or shall provide such other Lenders
with the benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such Benefitted Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Lenders;
provided, however, that if all or any portion of such excess payment or benefits
- -------- -------
is thereafter recovered from such Benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided
by law, each Lender shall have the right, without prior notice to the Company or
the Borrowers, any such notice being expressly waived by the Company and the
Borrowers to the extent permitted by applicable law, upon any amount becoming
due and payable by the Company or either of the Borrowers hereunder (whether at
the stated maturity, by acceleration or otherwise) to set off and appropriate
and apply against such amount any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Lender or any branch or agency thereof to or for the credit or the
account of the Company or the Borrowers. Each Lender agrees promptly to notify
the Company, the Borrowers and the Administrative Agent after any such setoff
and application made by such Lender, provided that the failure to give such
--------
notice shall not affect the validity of such setoff and application.
11.8 Counterparts. This Agreement may be executed by one or more of
------------
the parties to this Agreement on any number of separate counterparts (including
by telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this Agreement
signed by all the parties shall be lodged with Details and the Administrative
Agent.
11.9 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.10 Integration. This Agreement and the other Loan Documents
-----------
represent the agreement of the Company, the Borrowers, the Administrative Agent
and the Lenders with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents.
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11.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
-------------
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
11.12 Submission To Jurisdiction; Waivers. Each of the Company and
-----------------------------------
the Borrowers hereby irrevocably and unconditionally:
(a) submits for itself and its Property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Company or the Borrowers, as the case may be at its address set forth in
Section 11.2 or at such other address of which the Administrative Agent
shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section 11.12 any special, exemplary, punitive or consequential
damages.
11.13 Acknowledgements. Each of the Company and the Borrowers
----------------
hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to the Company or the Borrowers arising out of or
in connection with this Agreement or any of the other Loan Documents, and
the relationship between Administrative Agent and Lenders, on one hand, and
the Company and the Borrowers, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among the Company, the Borrowers and the Lenders.
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11.14 WAIVERS OF JURY TRIAL. THE COMPANY, THE BORROWERS, THE
---------------------
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
11.15 Confidentiality. Each of the Administrative Agent and each
---------------
Lender agrees to use reasonable efforts to keep confidential all non-public
information provided to it by any Loan Party pursuant to this Agreement that is
designated by such Loan Party as confidential; provided that nothing herein
--------
shall prevent the Administrative Agent or any Lender from disclosing any such
information (a) to the Administrative Agent, any other Lender or any affiliate
of any Lender, (b) to any Participant or Assignee (each, a "Transferee") or
----------
prospective Transferee which agrees to comply with the provisions of this
Section 11.15, (c) to the employees, directors, agents, attorneys, accountants
and other professional advisors of such Lender or its affiliates, (d) upon the
request or demand of any Governmental Authority having jurisdiction over the
Administrative Agent or such Lender, (e) in response to any order of any court
or other Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law, (f) if requested or required to do so in connection with any
litigation or similar proceeding, (g) which has been publicly disclosed other
than in breach of this Section 11.15, (h) to the National Association of
Insurance Commissioners or any similar organization or any nationally recognized
rating agency that requires access to information about a Lender's investment
portfolio in connection with ratings issued with respect to such Lender, or (i)
in connection with the exercise of any remedy hereunder or under any other Loan
Document.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
DETAILS CAPITAL CORP.
By: /s/ Joseph P. Gisch
------------------------------------------
Name: Joseph P. Gisch
Title:
DETAILS, INC.
By: /s/ Joseph P. Gisch
------------------------------------------
Name: Joseph P. Gisch
Title:
DYNAMIC CIRCUITS, INC.
By: /s/ Thomas P. Caldwell
------------------------------------------
Name: Thomas P. Caldwell
Title:
THE CHASE MANHATTAN BANK, as
Administrative Agent, Collateral Agent, Co-
Syndication Agent and as a Lender
By: /s/ Larry Palumbo
------------------------------------------
Name: Larry Palumbo
Title:
BANKERS TRUST COMPANY, as Documentation Agent,
Co-Syndication Agent and as a Lender
By: /s/ David J. Bell
------------------------------------------
Name: David J. Bell
Title:
-86-
<PAGE>
DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN
BRANCHES, as Co-Agent and as a Lender
By: [SIGNATURE APPEARS HERE]
--------------------------------------------
Name:
Title:
By: [SIGNATURE APPEARS HERE]
--------------------------------------------
Name:
Title:
-87-
<PAGE>
Annex A
-------
PRICING GRID FOR REVOLVING CREDIT LOANS, SWING LINE LOANS
TRANCHE A TERM LOANS AND COMMITMENT FEES
<TABLE>
<CAPTION>
===================================================================================================================
Applicable Margin Applicable Margin
for Eurodollar for ABR Loans and
Consolidated Loans and Letters of Swing Line Loans Commitment
Leverage Ratio Credit Fee Rate
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
greater than or equal to 5.00 to 1.0 2.25% 1.25% 0.50%
- -------------------------------------------------------------------------------------------------------------------
less than 5.00 to 1.0 and 2.00% 1.00% 0.50%
greater than or equal to 4.00 to 1.0
- -------------------------------------------------------------------------------------------------------------------
less than 4.00 to 1.0 and 1.75% 0.75% 0.375%
greater than or equal to 3.00 to 1.0
- -------------------------------------------------------------------------------------------------------------------
less than 3.00 to 1.0 and 1.50% 0.50% 0.375%
greater than or equal to 2.50 to 1.0
- -------------------------------------------------------------------------------------------------------------------
less than 2.50 to 1.0 1.25% 0.25% 0.375%
===================================================================================================================
</TABLE>
Changes in the Applicable Margin with respect to Tranche A Term Loans or
Revolving Credit Loans or in the Commitment Fee Rate resulting from changes in
the Consolidated Leverage Ratio shall become effective on the date (the
"Adjustment Date") on which financial statements are delivered to the Lenders
---------------
pursuant to Section 6.1 (but in any event not later than the 45th day after the
end of each of the first three quarterly periods of each fiscal year or the 90th
day after the end of each fiscal year, as the case may be) and shall remain in
effect until the next change to be effected pursuant to this paragraph. If any
financial statements referred to above are not delivered within the time periods
specified above, then, until such financial statements are delivered, if the
Administrative Agent or the Required Lenders so determine, the Consolidated
Leverage Ratio as at the end of the fiscal period that would have been covered
thereby shall for the purposes of this definition be deemed to be greater than
5.00 to 1.0. In addition, at all times while an Event of Default shall have
occurred and be continuing and the Administrative Agent or the Required Lenders
so determine, the Consolidated Leverage Ratio shall for the purposes of this
definition be deemed to be greater than 5.00 to 1.0. Each determination of the
Consolidated Leverage Ratio pursuant to this definition shall be made with
respect to the period of four consecutive fiscal quarters of Details ending at
the end of the period covered by the relevant financial statements.
-88-
<PAGE>
SCHEDULE 1.1A
-------------
COMMITMENTS
----------------
<TABLE>
<CAPTION>
============================================================================================
Tranche A Tranche B Revolving
Term Loan Term Loan Credit
Lender Commitment Commitment Commitment
============================================================================================
<S> <C> <C> <C>
The Chase Manhattan Bank $40,261,437.91 $ 99,607,843.14 $20,130,718.96
- --------------------------------------------------------------------------------------------
Bankers Trust Company $33,071,895.42 $ 65,392,156.86 $16,535,947.71
- --------------------------------------------------------------------------------------------
Dresdner Bank AG, New York and $16,666,666.67 $ 8,333,333.33
Grand Cayman Branches
- --------------------------------------------------------------------------------------------
TOTALS $90,000,000.00 $165,000,000.00 $45,000,000.00
============================================================================================
</TABLE>
-89-
<PAGE>
================================================================================
GUARANTEE AND COLLATERAL AGREEMENT
made by
DETAILS INTERMEDIATE HOLDINGS CORP.,
DETAILS CAPITAL CORP.,
DETAILS, INC.,
DYNAMIC CIRCUITS, INC.,
and certain of their Subsidiaries
in favor of
THE CHASE MANHATTAN BANK,
as Administrative Agent
Dated as of July 23, 1998
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
SECTION 1. DEFINED TERMS......................................................... 1
1.1 Definitions............................................................ 1
1.2 Other Definitional Provisions.......................................... 5
SECTION 2. GUARANTEE............................................................. 5
2.1 Guarantee.............................................................. 5
2.2 Right of Contribution.................................................. 6
2.3 No Subrogation......................................................... 6
2.4 Amendments, etc. with respect to the Borrower Obligations.............. 6
2.5 Guarantee Absolute and Unconditional................................... 7
2.6 Reinstatement.......................................................... 8
2.7 Payments............................................................... 8
SECTION 3. GRANT OF SECURITY INTEREST............................................ 8
SECTION 4. REPRESENTATIONS AND WARRANTIES........................................ 9
4.1 Representations in Credit Agreement.................................... 9
4.2 Title; No Other Liens.................................................. 9
4.3 Perfected First Priority Liens......................................... 9
4.4 Chief Executive Office................................................. 9
4.5 Inventory and Equipment................................................ 9
4.6 Farm Products.......................................................... 9
4.7 Pledged Securities..................................................... 10
4.8 Receivables............................................................ 10
4.9 Intellectual Property.................................................. 10
SECTION 5. COVENANTS............................................................. 11
5.1 Delivery of Instruments and Chattel Paper.............................. 11
5.2 Maintenance of Insurance............................................... 11
5.3 Payment of Obligations................................................. 11
5.4 Maintenance of Perfected Security Interest; Further Documentation...... 11
5.5 Changes in Locations, Name, etc........................................ 12
5.6 Notices................................................................ 12
5.7 Pledged Securities..................................................... 12
5.8 Receivables............................................................ 13
5.9 Intellectual Property.................................................. 13
SECTION 6. REMEDIAL PROVISIONS................................................... 15
6.1 Certain Matters Relating to Receivables................................ 15
6.2 Communications with Obligors; Grantors Remain Liable................... 15
6.3 Pledged Stock.......................................................... 16
6.4 Proceeds to be Turned Over To Administrative Agent..................... 17
6.5 Application of Proceeds................................................ 17
6.6 Code and Other Remedies................................................ 17
6.7 Registration Rights.................................................... 18
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
6.8 Waiver; Deficiency..................................................... 19
SECTION 7. THE ADMINISTRATIVE AGENT.............................................. 19
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc............ 19
7.2 Duty of Administrative Agent........................................... 20
7.3 Execution of Financing Statements...................................... 21
7.4 Authority of Administrative Agent...................................... 21
SECTION 8. MISCELLANEOUS......................................................... 21
8.1 Amendments in Writing.................................................. 21
8.2 Notices................................................................ 21
8.3 No Waiver by Course of Conduct; Cumulative Remedies.................... 21
8.4 Enforcement Expenses; Indemnification.................................. 22
8.5 Successors and Assigns................................................. 22
8.6 Set-Off................................................................ 22
8.7 Counterparts........................................................... 23
8.8 Severability........................................................... 23
8.9 Section Headings....................................................... 23
8.10 Integration............................................................ 23
8.11 GOVERNING LAW.......................................................... 23
8.12 Submission To Jurisdiction; Waivers.................................... 23
8.13 Acknowledgements....................................................... 24
8.14 WAIVER OF JURY TRIAL................................................... 24
8.15 Additional Grantors.................................................... 24
8.16 Releases............................................................... 24
</TABLE>
<PAGE>
GUARANTEE AND COLLATERAL AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT, dated as of July 23, 1998, made by
each of the signatories hereto (together with any other entity that may become a
party hereto as provided herein, the "Grantors"), in favor of THE CHASE
--------
MANHATTAN BANK, as Administrative Agent (in such capacity, the "Administrative
--------------
Agent") for the banks and other financial institutions (the "Lenders") from time
- ----- -------
to time parties to the Credit Agreement, dated as of July 23, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
----------------
among Details, Inc. (the "Details"), Dynamic Circuits, Inc. ("DCI", and
------- ---
collectively with Details, the "Borrowers", and individually, a "Borrower"), the
--------- --------
Lenders and the Administrative Agent.
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make extensions of credit to either of the Borrowers upon the terms
and subject to the conditions set forth therein;
WHEREAS, each of the Borrowers are members of an affiliated group of
companies that includes each other Grantor;
WHEREAS, the proceeds of the extensions of credit under the Credit
Agreement may be used in part to enable the Borrowers to make valuable transfers
to one or more of the other Grantors in connection with the operation of their
respective businesses;
WHEREAS, the Borrowers and the other Grantors are engaged in related
businesses, and each Grantor will derive substantial direct and indirect benefit
from the making of the extensions of credit under the Credit Agreement; and
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective initial extensions of credit to the Borrowers under the
Credit Agreement that the Grantors shall have executed and delivered this
Agreement to the Administrative Agent for the ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit thereunder,
each Grantor hereby agrees with the Administrative Agent, for the ratable
benefit of the Lenders, as follows:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms defined
-----------
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement, and the following terms which are defined in the Uniform
Commercial Code in effect in the State of New York on the date hereof are used
herein as so defined: Accounts, Chattel Paper, Documents, Equipment, Farm
Products, Instruments, Inventory and Investment Property.
(b) The following terms shall have the following meanings:
"Agreement": this Guarantee and Collateral Agreement, as the same may
---------
be amended, supplemented or otherwise modified from time to time.
<PAGE>
2
"Borrower Obligations": the collective reference to the DCI
--------------------
Obligations (as defined in the Credit Agreement) and the Details
Obligations.
"Collateral": as defined in Section 3.
----------
"Collateral Account": any collateral account established by the
------------------
Administrative Agent as provided in Section 6.1 or 6.4.
"Copyrights": (i) all copyrights arising under the laws of the United
----------
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished (including,
without limitation, those listed in Schedule 6), all registrations and
----------
recordings thereof, and all applications in connection therewith,
including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, and (ii) the right to
obtain all renewals thereof.
"Copyright Licenses": any written agreement naming any Grantor as
------------------
licensor or licensee (including, without limitation, those listed in
Schedule 6), granting any right under any Copyright, including, without
----------
limitation, the grant of rights to manufacture, distribute, exploit and
sell materials derived from any Copyright, to the extent the grant by such
Grantor of a security interest pursuant to this Agreement in such agreement
is not prohibited by such agreement without the consent of any other party
thereto, would not give any other party to such agreement the right to
terminate its obligations thereunder, or is permitted with consent if all
necessary consents to such grant of a security interest have been obtained
from the other parties thereto.
"Details Obligations": the collective reference to the unpaid
-------------------
principal of and interest on the Loans made to Details and the
Reimbursement Obligations of Details and all other obligations and
liabilities of Details (including, without limitation, interest accruing at
the then applicable rate provided in the Credit Agreement after the
maturity of such Loans and such Reimbursement Obligations and interest
accruing at the then applicable rate provided in the Credit Agreement after
the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to Details, in its
capacity as a borrower under the Credit Agreement, whether or not a claim
for post-filing or post-petition interest is allowed in such proceeding) to
the Administrative Agent or any Lender (or, in the case of any Hedge
Agreement referred to below, any Affiliate of any Lender), whether direct
or indirect, absolute or contingent, due or to become due, or now existing
or hereafter incurred, which may arise under, out of, or in connection
with, the Credit Agreement, this Agreement, the other Loan Documents, any
Letter of Credit or any Hedge Agreement entered into by Details with any
Lender (or any Affiliate of any Lender) or any other document made,
delivered or given in connection therewith, in each case whether on account
of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Administrative Agent or to the Lenders that
are required to be paid by Details pursuant to the terms of any of the
foregoing agreements).
"Domestic Issuer": any Issuer that is organized under the laws of any
---------------
jurisdiction within the United States.
<PAGE>
3
"Foreign Issuer": any Issuer that is organized under the laws of any
--------------
jurisdiction outside the United States.
"General Intangibles": all "general intangibles" as such term is
-------------------
defined in Section 9-106 of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, in any event, including, without
limitation, with respect to any Grantor, all contracts, agreements,
instruments and indentures in any form, and portions thereof, to which such
Grantor is a party or under which such Grantor has any right, title or
interest or to which such Grantor or any property of such Grantor is
subject, as the same may from time to time be amended, supplemented or
otherwise modified, including, without limitation, (i) all rights of such
Grantor to receive moneys due and to become due to it thereunder or in
connection therewith, (ii) all rights of such Grantor to damages arising
thereunder and (iii) all rights of such Grantor to perform and to exercise
all remedies thereunder, in each case to the extent the grant by such
Grantor of a security interest pursuant to this Agreement in its right,
title and interest in such contract, agreement, instrument or indenture is
not prohibited by such contract, agreement, instrument or indenture without
the consent of any other party thereto, would not give any other party to
such contract, agreement, instrument or indenture the right to terminate
its obligations thereunder, or is permitted with consent if all necessary
consents to such grant of a security interest have been obtained from the
other parties thereto (it being understood that the foregoing shall not be
deemed to obligate such Grantor to obtain such consents); provided, that
--------
the foregoing limitation shall not affect, limit, restrict or impair the
grant by such Grantor of a security interest pursuant to this Agreement in
any Receivable or any money or other amounts due or to become due under any
such contract, agreement, instrument or indenture.
"Guarantor Obligations": with respect to any Guarantor, the
---------------------
collective reference to (i) the Borrower Obligations and (ii) all
obligations and liabilities of such Guarantor which may arise under or in
connection with this Agreement or any other Loan Document to which such
Guarantor is a party, in each case whether on account of guarantee
obligations, reimbursement obligations, fees, indemnities, costs, expenses
or otherwise (including, without limitation, all fees and disbursements of
counsel to the Administrative Agent or to the Lenders that are required to
be paid by such Guarantor pursuant to the terms of this Agreement or any
other Loan Document).
"Guarantors": the collective reference to each Grantor other than (i)
----------
with respect to the DCI Obligations only, DCI, (ii) with respect to the
Details Obligations only, Details, and and (iii) any Grantor that is a
Foreign Subsidiary.
"Hedge Agreements": as to any Person, all interest rate swaps, caps
----------------
or collar agreements or similar arrangements entered into by such Person
providing for protection against fluctuations in interest rates or currency
exchange rates or the exchange of nominal interest obligations, either
generally or under specific contingencies.
"Intellectual Property": the collective reference to all rights,
---------------------
priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including, without limitation, the Copyrights, the Copyright Licenses, the
Patents, the Patent Licenses, the Trademarks and the Trademark Licenses,
and all rights to sue
<PAGE>
4
at law or in equity for any infringement or other impairment thereof,
including the right to receive all proceeds and damages therefrom.
"Intercompany Note": any promissory note evidencing loans made by any
-----------------
Grantor to its direct or indirect parent or any of its Subsidiaries.
"Issuers": the collective reference to each issuer of a Pledged
-------
Security.
"New York UCC": the Uniform Commercial Code as from time to time in
------------
effect in the State of New York.
"Obligations": (i) in the case of Details, the Details Obligations,
-----------
(ii) in the case of DCI, the DCI Obligations, and (iii) in the case of each
Guarantor, its Guarantor Obligations.
"Patents": (i) all letters patent of the United States, any other
-------
country or any political subdivision thereof, all reissues and extensions
thereof and all goodwill associated therewith, including, without
limitation, any of the foregoing referred to in Schedule 6, (ii) all
----------
applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any of the foregoing referred to in Schedule
--------
6, and (iii) all rights to obtain any reissues or extensions of the
-
foregoing.
"Patent License": all agreements, whether written or oral, providing
--------------
for the grant by or to any Grantor of any right to manufacture, use or sell
any invention covered in whole or in part by a Patent, including, without
limitation, any of the foregoing referred to in Schedule 6 to the extent
----------
the grant by such Grantor of a security interest pursuant to this Agreement
in its right, title and interest in such agreement is not prohibited by
such agreement without the consent of any other party thereto, would not
give any other party to such agreement the right to terminate its
obligations thereunder, or is permitted with consent if all necessary
consents to such grant of a security interest have been obtained from the
other parties thereto.
"Pledged Notes": all promissory notes listed on Schedule 2, all
------------- ----------
Intercompany Notes at any time issued to any Grantor and all other
promissory notes issued to or held by any Grantor (other than promissory
notes issued in connection with extensions of trade credit by any Grantor
in the ordinary course of business) or any Investment Property.
"Pledged Securities": the collective reference to the Pledged Notes
------------------
and the Pledged Stock.
"Pledged Stock": the shares of Capital Stock listed on Schedule 2,
------------- ----------
together with any other shares, stock certificates, options or rights of
any nature whatsoever in respect of the Capital Stock of any Person that
may be issued or granted to, or held by, any Grantor while this Agreement
is in effect or any Investment Property.
"Proceeds": all "proceeds" as such term is defined in Section 9-
--------
306(1) of the Uniform Commercial Code in effect in the State of New York on
the date hereof and, in any event, shall include, without limitation, all
dividends or other income from the Pledged Securities, collections thereon
or distributions or payments with respect thereto.
<PAGE>
5
"Receivable": any right to payment for goods sold or leased or for
----------
services rendered, whether or not such right is evidenced by an Instrument
or Chattel Paper and whether or not it has been earned by performance
(including, without limitation, any Account).
"Securities Act": the Securities Act of 1933, as amended.
--------------
"Trademarks": (i) all trademarks, trade names, corporate names,
----------
company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, and all
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof, or
otherwise, and all common-law rights related thereto, including, without
limitation, any of the foregoing referred to in Schedule 6, and (ii) the
----------
right to obtain all renewals thereof.
"Trademark License": any agreement, whether written or oral,
-----------------
providing for the grant by or to any Grantor of any right to use any
Trademark, including, without limitation, any of the foregoing referred to
in Schedule 6 to the extent the grant by such Grantor of a security
----------
interest pursuant to this Agreement in its right, title and interest in
such agreement is not prohibited by such agreement without the consent of
any other party thereto, would not give any other party to such agreement
the right to terminate its obligations thereunder, or is permitted with
consent if all necessary consents to such grant of a security interest have
been obtained from the other parties thereto.
1.2 Other Definitional Provisions. (a) The words "hereof,"
-----------------------------
"herein", "hereto" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Section and Schedule references are to this
Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral or
any part thereof, when used in relation to a Grantor, shall refer to such
Grantor's Collateral or the relevant part thereof.
SECTION 2. GUARANTEE
2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and
---------
severally, unconditionally and irrevocably, guarantees to the Administrative
Agent, for the ratable benefit of the Lenders and their respective successors,
indorsees, transferees and assigns, the prompt and complete payment and
performance by the Borrowers when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower Obligations.
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under applicable federal and state
<PAGE>
6
laws relating to the insolvency of debtors (after giving effect to the right of
contribution established in Section 2.2).
(c) Each Guarantor agrees that the Borrower Obligations may at any
time and from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing the guarantee contained in this Section 2 or
affecting the rights and remedies of the Administrative Agent or any Lender
hereunder.
(d) The guarantee contained in this Section 2 shall remain in full
force and effect until all the Borrower Obligations and the obligations of each
Guarantor under the guarantee contained in this Section 2 shall have been
satisfied by payment in full, no Letter of Credit shall be outstanding and the
Commitments shall be terminated, notwithstanding that from time to time during
the term of the Credit Agreement either of the Borrowers may be free from any
Borrower Obligations.
(e) No payment made by the Borrowers, any of the Guarantors, any
other guarantor or any other Person or received or collected by the
Administrative Agent or any Lender from the Borrowers, any of the Guarantors,
any other guarantor or any other Person by virtue of any action or proceeding or
any set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Borrower Obligations shall be deemed to
modify, reduce, release or otherwise affect the maximum liability of any
Guarantor hereunder which shall, notwithstanding any such payment (other than
any payment made by such Guarantor in respect of the Borrower Obligations or any
payment received or collected from such Guarantor in respect of the Borrower
Obligations), remain liable for the Borrower Obligations up to the maximum
liability of such Guarantor hereunder until the Borrower Obligations are paid in
full, no Letter of Credit shall be outstanding and the Commitments are
terminated.
2.2 Right of Contribution. Each Subsidiary Guarantor hereby agrees
---------------------
that to the extent that a Subsidiary Guarantor shall have paid more than its
proportionate share of any payment made hereunder, such Subsidiary Guarantor
shall be entitled to seek and receive contribution from and against any other
Subsidiary Guarantor hereunder which has not paid its proportionate share of
such payment. Each Subsidiary Guarantor's right of contribution shall be
subject to the terms and conditions of Section 2.3. The provisions of this
Section 2.2 shall in no respect limit the obligations and liabilities of any
Subsidiary Guarantor to the Administrative Agent and the Lenders, and each
Subsidiary Guarantor shall remain liable to the Administrative Agent and the
Lenders for the maximum liability of such Subsidiary Guarantor hereunder.
2.3 No Subrogation. Notwithstanding any payment made by any
--------------
Guarantor hereunder or any set-off or application of funds of any Guarantor by
the Administrative Agent or any Lender, no Guarantor shall be entitled to be
subrogated to any of the rights of the Administrative Agent or any Lender
against either of the Borrowers or any other Guarantor or any collateral
security or guarantee or right of offset held by the Administrative Agent or any
Lender for the payment of the Borrower Obligations, nor shall any Guarantor seek
or be entitled to seek any contribution or reimbursement from either of the
Borrowers or any other Guarantor in respect of payments made by such Guarantor
hereunder, until all amounts owing to the Administrative Agent and the Lenders
by the Borrowers on account of the Borrower Obligations are paid in full, no
Letter of Credit shall be outstanding and the Commitments are terminated. If
any amount shall be paid to any Guarantor on account of such subrogation rights
at any time when all of the Borrower Obligations shall not have been paid in
full,
<PAGE>
7
such amount shall be held by such Guarantor for the account of the
Administrative Agent and the Lenders, segregated from other funds of such
Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over
to the Administrative Agent in the exact form received by such Guarantor (duly
indorsed by such Guarantor to the Administrative Agent, if required), to be
applied against the Borrower Obligations, whether matured or unmatured, in such
order as the Administrative Agent may determine.
2.4 Amendments, etc. with respect to the Borrower Obligations. Each
---------------------------------------------------------
Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Borrower
Obligations made by the Administrative Agent or any Lender may be rescinded by
the Administrative Agent or such Lender and any of the Borrower Obligations
continued, and the Borrower Obligations, or the liability of any other Person
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Administrative Agent or any Lender, and the
Credit Agreement and the other Loan Documents and any other documents executed
and delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Administrative Agent (or the Required
Lenders or all Lenders, as the case may be) may deem advisable from time to
time, and any collateral security, guarantee or right of offset at any time held
by the Administrative Agent or any Lender for the payment of the Borrower
Obligations may be sold, exchanged, waived, surrendered or released. Neither
the Administrative Agent nor any Lender shall have any obligation to protect,
secure, perfect or insure any Lien at any time held by it as security for the
Borrower Obligations or for the guarantee contained in this Section 2 or any
property subject thereto.
2.5 Guarantee Absolute and Unconditional. Each Guarantor waives any
------------------------------------
and all notice of the creation, renewal, extension or accrual of any of the
Borrower Obligations and notice of or proof of reliance by the Administrative
Agent or any Lender upon the guarantee contained in this Section 2 or acceptance
of the guarantee contained in this Section 2; the Borrower Obligations, and any
of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in this Section 2; and all dealings between the Borrowers
and any of the Guarantors, on the one hand, and the Administrative Agent and the
Lenders, on the other hand, likewise shall be conclusively presumed to have been
had or consummated in reliance upon the guarantee contained in this Section 2.
Each Guarantor waives diligence, presentment, protest, demand for payment of the
Borrower Obligations and notice of default or nonpayment to or upon the
Borrowers or any of the Guarantors with respect to the Borrower Obligations.
Each Guarantor understands and agrees to the fullest extent permitted by
applicable law that the guarantee contained in this Section 2 shall be construed
as a continuing, absolute and unconditional guarantee of payment without regard
to (a) the validity or enforceability of the Credit Agreement or any other Loan
Document, any of the Borrower Obligations or any other collateral security
therefor or guarantee or right of offset with respect thereto at any time or
from time to time held by the Administrative Agent or any Lender, (b) any
defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the
Borrowers or any other Person against the Administrative Agent or any Lender, or
(c) any other circumstance whatsoever (with or without notice to or knowledge of
the Borrowers or such Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Borrowers for the Borrower
Obligations, or of such Guarantor under the guarantee contained in this Section
2, in
<PAGE>
8
bankruptcy or in any other instance. When making any demand hereunder or
otherwise pursuing its rights and remedies hereunder against any Guarantor, the
Administrative Agent or any Lender may, but shall be under no obligation to,
make a similar demand on or otherwise pursue such rights and remedies as it may
have against the Borrowers, any other Guarantor or any other Person or against
any collateral security or guarantee for the Borrower Obligations or any right
of offset with respect thereto, and any failure by the Administrative Agent or
any Lender to make any such demand, to pursue such other rights or remedies or
to collect any payments from the Borrowers, any other Guarantor or any other
Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of the Borrowers, any other
Guarantor or any other Person or any such collateral security, guarantee or
right of offset, shall not relieve any Guarantor of any obligation or liability
hereunder, and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of the Administrative Agent or
any Lender against any Guarantor. For the purposes hereof "demand" shall
include the commencement and continuance of any legal proceedings.
2.6 Reinstatement. The guarantee contained in this Section 2 shall
-------------
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Borrower Obligations is rescinded or
must otherwise be restored or returned by the Administrative Agent or any Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
either of the Borrowers or any Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, either of the Borrowers or any Guarantor or any substantial part of
its property, or otherwise, all as though such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that payments
--------
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars at the office of the Administrative Agent located at 270
Park Avenue, New York, New York 10017.
SECTION 3. GRANT OF SECURITY INTEREST
Each Grantor hereby assigns and transfers to the Administrative Agent,
and hereby grants to the Administrative Agent, for the ratable benefit of the
Lenders, a security interest in, all of the following property now owned or at
any time hereafter acquired by such Grantor or in which such Grantor now has or
at any time in the future may acquire any right, title or interest
(collectively, the "Collateral"), as collateral security for the prompt and
----------
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of such Grantor's Obligations,:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Documents;
(d) all Equipment;
(e) all General Intangibles;
(f) all Instruments;
<PAGE>
9
(g) all Intellectual Property;
(h) all Inventory;
(i) all Investment Property;
(j) all Pledged Securities;
(k) all books and records pertaining to the Collateral; and
(l) to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing and all collateral security and guarantees
given by any Person with respect to any of the foregoing.
Notwithstanding the foregoing, such Collateral does not include any
rights or property to the extent that any valid and enforceable law or
regulation applicable to such rights or property prohibits the creation of a
security interest therein. In addition, in the event that any Grantor disposes
of assets, in a transaction permitted by Section 7.5 of the Credit Agreement,
such assets, but not the proceeds or products thereof, shall be released from
the Lien on the Collateral.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into the
Credit Agreement and to induce the Lenders to make their respective extensions
of credit to the Borrowers thereunder, each Grantor hereby represents and
warrants to the Administrative Agent and each Lender that:
4.1 Representations in Credit Agreement. In the case of each
-----------------------------------
Guarantor, the representations and warranties set forth in Section 4 of the
Credit Agreement as they relate to such Guarantor or to the Loan Documents to
which such Guarantor is a party, each of which is hereby incorporated herein by
reference, are true and correct, and the Administrative Agent and each Lender
shall be entitled to rely on each of them as if they were fully set forth
herein, provided that each reference in each such representation and warranty to
--------
either of the Borrower's knowledge shall, for the purposes of this Section 4.1,
be deemed to be a reference to such Guarantor's knowledge.
4.2 Title; No Other Liens. Except for the security interest granted
---------------------
to the Administrative Agent for the ratable benefit of the Lenders pursuant to
this Agreement and the other Liens permitted to exist on the Collateral by the
Credit Agreement, such Grantor owns each item of the Collateral free and clear
of any and all Liens or claims of others. No financing statement or other
public notice with respect to all or any part of the Collateral is on file or of
record in any public office, except such as have been filed in favor of the
Administrative Agent, for the ratable benefit of the Lenders, pursuant to this
Agreement or as are permitted by the Credit Agreement.
4.3 Perfected First Priority Liens. The security interests granted
------------------------------
pursuant to this Agreement (a) upon completion of the filings and other actions
specified on Schedule 3 (which, in the case of all filings and other documents
----------
referred to on said Schedule, have been delivered to the Administrative Agent in
completed and duly executed form) will constitute valid perfected security
<PAGE>
10
interests in all of the Collateral in favor of the Administrative Agent, for the
ratable benefit of the Lenders, as collateral security for such Grantor's
Obligations, enforceable in accordance with the terms hereof against all
creditors of such Grantor and any Persons purporting to purchase any Collateral
from such Grantor and (b) are prior to all other Liens on the Collateral in
existence on the date hereof except for Liens permitted by the Credit Agreement
which have priority over the Liens on the Collateral by operation of law.
4.4 Chief Executive Office. On the date hereof, such Grantor's
----------------------
jurisdiction of organization and the location of such Grantor's chief executive
office or sole place of business are specified on Schedule 4.
----------
4.5 Inventory and Equipment. On the date hereof, the Inventory and
-----------------------
the Equipment (other than mobile goods) are kept at the locations listed on
Schedule 5.
- ----------
4.6 Farm Products. None of the Collateral constitutes, or is the
-------------
Proceeds of, Farm Products.
4.7 Pledged Securities. (a) The shares of Pledged Stock pledged by
------------------
such Grantor hereunder constitute (i) all the issued and outstanding shares of
all classes of the Capital Stock of each Domestic Issuer owned by such Grantor
and (ii) 65% of the issued and outstanding shares of all classes of the Capital
Stock of each Foreign Issuer owned by such Grantor.
(b) All the shares of the Pledged Stock issued by either of the
Borrowers or any of its Subsidiaries have been duly and validly issued and are
fully paid and nonassessable.
(c) Each of the Pledged Notes of either of the Borrowers or any of
its Subsidiaries constitutes the legal, valid and binding obligation of the
obligor with respect thereto, enforceable in accordance with its terms, subject
to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
(d) Such Grantor is the record and beneficial owner of, and has good
and marketable title to, the Pledged Securities pledged by it hereunder, free of
any and all Liens or options in favor of, or claims of, any other Person, except
the security interest created by this Agreement.
4.8 Receivables. (a) No amount payable to such Grantor under or in
-----------
connection with any Receivable is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Administrative Agent.
(b) Not more than 5% of the aggregate amount of the then outstanding
Receivables relate to obligors which are Governmental Authorities.
(c) The amounts represented by such Grantor to the Lenders from time
to time as owing to such Grantor in respect of the Receivables will at such
times be accurate.
<PAGE>
11
4.9 Intellectual Property. (a) Schedule 6 lists all Intellectual
--------------------- ----------
Property owned by such Grantor in its own name on the date hereof.
(b) Each Grantor owns, or is licensed to use, all Intellectual
Property necessary for the conduct of its business as currently conducted. No
material claim has been asserted and is pending by any Person challenging or
questioning the use of any Intellectual Property or the validity or
effectiveness of any Intellectual Property, nor does such Grantor know of any
valid basis for any such claim. The use by such Grantor of Intellectual
Property which is material to the operations of the Borrowers and their
respective Subsidiaries does not infringe on the rights of any Person in any
material respect. No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of, or
such Grantor's rights in, any Intellectual Property in any respect that could
reasonably be expected to have a Material Adverse Effect.
(c) Except as set forth in Schedule 6, on the date hereof, none of
----------
the Intellectual Property is the subject of any licensing or franchise agreement
pursuant to which such Grantor is the licensor or franchisor.
SECTION 5. COVENANTS
Each Grantor covenants and agrees with the Administrative Agent and
the Lenders that, from and after the date of this Agreement until the
Obligations shall have been paid in full, no Letter of Credit shall be
outstanding and the Commitments shall have terminated:
5.1 Delivery of Instruments and Chattel Paper. If any amount payable
-----------------------------------------
under or in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper not constituting Investment Property, such
Instrument or Chattel Paper shall be immediately delivered to the Administrative
Agent, duly indorsed in a manner satisfactory to the Administrative Agent, to be
held as Collateral pursuant to this Agreement.
5.2 Maintenance of Insurance. (a) Such Grantor will maintain, with
------------------------
financially sound and reputable companies, insurance policies (i) insuring the
Inventory and Equipment against loss by fire, explosion, theft and such other
casualties as may be reasonably satisfactory to the Administrative Agent and
(ii) insuring such Grantor, the Administrative Agent and the Lenders against
liability for personal injury and property damage relating to such Inventory and
Equipment or to any motor vehicles owned or operated by such Grantor, such
policies to be in such form and amounts and having such coverage as may be
reasonably satisfactory to the Administrative Agent and the Lenders.
(b) All such insurance shall (i) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Administrative Agent of
written notice thereof, (ii) name the Administrative Agent as insured party or
loss payee, (iii) if reasonably requested by the Administrative Agent, include a
breach of warranty clause and (iv) be reasonably satisfactory in all other
respects to the Administrative Agent.
(c) The Borrowers shall deliver to the Administrative Agent and the
Lenders a report of a reputable insurance broker with respect to such insurance
at the time of delivery of the financial statements described in Section 6.1(a)
of the Credit Agreement.
<PAGE>
12
5.3 Payment of Obligations. Such Grantor will pay and discharge or
----------------------
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all its material obligations of whatever nature, against or with
respect to the Collateral, except that no such charge need be paid if the amount
or validity thereof is currently being contested in good faith by appropriate
proceedings, reserves in conformity with GAAP with respect thereto have been
provided on the books of such Grantor and such proceedings could not reasonably
be expected to result in the sale, forfeiture or loss of any material portion of
the Collateral or any interest therein.
5.4 Maintenance of Perfected Security Interest; Further
---------------------------------------------------
Documentation. (a) Such Grantor shall maintain the security interest created
by this Agreement as a perfected security interest having at least the priority
described in Section 4.3 and shall defend such security interest against the
claims and demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Administrative Agent and the
Lenders from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Administrative Agent may reasonably request, all in reasonable
detail.
(c) At any time and from time to time, upon the written request of
the Administrative Agent, and at the sole expense of such Grantor, such Grantor
will promptly and duly execute and deliver, and have recorded, such further
instruments and documents and take such further actions as the Administrative
Agent may reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code (or other similar laws) in effect
in any jurisdiction with respect to the security interests created hereby.
5.5 Changes in Locations, Name, etc. Such Grantor will not, except
--------------------------------
upon 15 days' prior written notice to the Administrative Agent and delivery to
the Administrative Agent of (a) all additional executed financing statements and
other documents reasonably requested by the Administrative Agent to maintain the
validity, perfection and priority of the security interests provided for herein
and (b) if applicable, a written supplement to Schedule 5 showing any additional
----------
location at which Inventory or Equipment shall be kept:
(i) permit any of the Inventory or Equipment to be kept at a
location other than those listed on Schedule 5;
----------
(ii) change the location of its chief executive office or sole place
of business from that referred to in Section 4.4; or
(iii) change its name, identity or corporate structure to such an
extent that any financing statement filed by the Administrative Agent in
connection with this Agreement would become misleading.
5.6 Notices. Such Grantor will advise the Administrative Agent and
-------
the Lenders promptly, in reasonable detail, of:
<PAGE>
13
(a) any Lien (other than security interests created hereby or Liens
permitted under the Credit Agreement) on any of the Collateral which would
adversely affect the ability of the Administrative Agent to exercise any of its
remedies hereunder; and
(b) the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
5.7 Pledged Securities. (a) If such Grantor shall become entitled
------------------
to receive or shall receive any stock certificate (including, without
limitation, any certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of capital or any
certificate issued in connection with any reorganization), option or rights in
respect of the Capital Stock of any Issuer or any Investment Property, whether
in addition to, in substitution of, as a conversion of, or in exchange for, any
shares of the Pledged Stock, or otherwise in respect thereof, such Grantor shall
accept the same as the agent of the Administrative Agent and the Lenders, hold
the same in trust for the Administrative Agent and the Lenders and deliver the
same forthwith to the Administrative Agent in the exact form received, duly
indorsed by such Grantor to the Administrative Agent, if required, together with
an undated stock power covering such certificate duly executed in blank by such
Grantor and with, if the Administrative Agent so requests, signature guaranteed,
to be held by the Administrative Agent, subject to the terms hereof, as
additional collateral security for the Obligations. Any sums paid upon or in
respect of the Pledged Securities upon the liquidation or dissolution of any
Issuer shall be paid over to the Administrative Agent to be held by it hereunder
as additional collateral security for the Obligations, and in case any
distribution of capital shall be made on or in respect of the Pledged Securities
or any property shall be distributed upon or with respect to the Pledged
Securities pursuant to the recapitalization or reclassification of the capital
of any Issuer or pursuant to the reorganization thereof, the property so
distributed shall, unless otherwise subject to a perfected security interest in
favor of the Administrative Agent, be delivered to the Administrative Agent to
be held by it hereunder as additional collateral security for the Obligations.
If any sums of money or property so paid or distributed in respect of the
Pledged Securities shall be received by such Grantor, such Grantor shall, until
such money or property is paid or delivered to the Administrative Agent, hold
such money or property for the account of the Lenders, segregated from other
funds of such Grantor, as additional collateral security for the Obligations.
(b) Without the prior written consent of the Administrative Agent,
such Grantor will not (i) vote to enable, or take any other action to permit,
any Issuer to issue any stock or other equity securities of any nature or to
issue any other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of any Issuer,
in each case, to any Person other than the Administrative Agent, (ii) sell,
assign, transfer, exchange, or otherwise dispose of, or grant any option with
respect to, the Pledged Securities or Proceeds thereof (except pursuant to a
transaction expressly permitted by the Credit Agreement), (iii) create, incur or
permit to exist any Lien or option in favor of, or any claim of any Person with
respect to, any of the Pledged Securities or Proceeds thereof, or any interest
therein, except for the security interests created by this Agreement or (iv)
enter into any agreement or undertaking restricting the right or ability of such
Grantor or the Administrative Agent to sell, assign or transfer any of the
Pledged Securities or Proceeds thereof.
(c) In the case of each Grantor which is an Issuer, such Issuer
agrees that (i) it will be bound by the terms of this Agreement relating to the
Pledged Securities issued by it and will comply
<PAGE>
14
with such terms insofar as such terms are applicable to it, (ii) it will notify
the Administrative Agent promptly in writing of the occurrence of any of the
events described in Section 5.8(a) with respect to the Pledged Securities issued
by it and (iii) the terms of Sections 6.3(c) and 6.7 shall apply to it, mutatis
-------
mutandis, with respect to all actions that may be required of it pursuant to
- --------
Section 6.3(c) or 6.7 with respect to the Pledged Securities issued by it.
5.8 Receivables. (a) Other than in the ordinary course of business
-----------
consistent with its past practice, such Grantor will not (i) grant any extension
of the time of payment of any Receivable, (ii) compromise or settle any
Receivable for less than the full amount thereof, (iii) release, wholly or
partially, any Person liable for the payment of any Receivable, (iv) allow any
credit or discount whatsoever on any Receivable or (v) amend, supplement or
modify any Receivable in any manner that could adversely affect the value
thereof.
(b) Such Grantor will deliver to the Administrative Agent a copy of
each material demand, notice or document received by it that questions or calls
into doubt the validity or enforceability of more than 5% of the aggregate
amount of the then outstanding Receivables.
5.9 Intellectual Property. (a) Such Grantor (either itself or
---------------------
through licensees) will (i) continue to use each material Trademark on each and
every trademark class of goods applicable to its current line as reflected in
its current catalogs, brochures and price lists in order to maintain such
Trademark in full force free from any claim of abandonment for non-use, (ii)
maintain as in the past the quality of products and services offered under such
Trademark, (iii) use such Trademark with the appropriate notice of registration
and all other notices and legends required by applicable Requirements of Law,
(iv) not adopt or use any mark which is confusingly similar or a colorable
imitation of such Trademark unless the Administrative Agent, for the ratable
benefit of the Lenders, shall obtain a perfected security interest in such mark
pursuant to this Agreement, and (v) not (and not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby such
Trademark may become invalidated or impaired in any way, except in each case to
the extent that taking, or omitting to take, such action would not have a
Material Adverse Effect.
(b) Such Grantor (either itself or through licensees) will not do any
act, or omit to do any act, whereby any material Patent may become forfeited,
abandoned or dedicated to the public, except in each case to the extent that
taking, or omitting to take, such action would not have a Material Adverse
Effect.
(c) Such Grantor (either itself or through licensees) (i) will employ
each material Copyright and (ii) will not (and will not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby any
material portion of the Copyrights may become invalidated or otherwise impaired.
Such Grantor will not (either itself or through licensees) do any act whereby
any material portion of the Copyrights may fall into the public domain, except
to the extent that taking such action would not have a Material Adverse Effect.
(d) Such Grantor (either itself or through licensees) will not do any
act that knowingly uses any material Intellectual Property to infringe the
intellectual property rights of any other Person, except to the extent that
taking such action would not have a Material Adverse Effect.
<PAGE>
15
(e) Such Grantor will notify the Administrative Agent and the Lenders
immediately if it knows, or has reason to know, that any application or
registration relating to any material Intellectual Property may become
forfeited, abandoned or dedicated to the public, or of any adverse determination
or development (including, without limitation, the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or any court or tribunal in
any country) regarding such Grantor's ownership of, or the validity of, any
material Intellectual Property or such Grantor's right to register the same or
to own and maintain the same.
(f) Whenever such Grantor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Intellectual Property with the United States Patent and Trademark Office,
the United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, such Grantor shall report such
filing to the Administrative Agent within five Business Days after the last day
of the fiscal quarter in which such filing occurs. Upon the reasonable request
of the Administrative Agent, such Grantor shall execute and deliver, and have
recorded, any and all agreements, instruments, documents, and papers as the
Administrative Agent may request to evidence the Administrative Agent's and the
Lenders' security interest in any Copyright, Patent or Trademark and the
goodwill and general intangibles of such Grantor relating thereto or represented
thereby.
(g) Such Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the material Intellectual Property, including,
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(h) In the event that any material Intellectual Property is
infringed, misappropriated or diluted by a third party, such Grantor shall (i)
take such actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the
Administrative Agent after it learns thereof and sue for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and to
recover any and all damages for such infringement, misappropriation or dilution.
SECTION 6. REMEDIAL PROVISIONS
6.1 Certain Matters Relating to Receivables. (a) The Administrative
---------------------------------------
Agent shall have the right to make test verifications of the Receivables in any
manner and through any medium that it reasonably considers advisable, and each
Grantor shall furnish all such assistance and information as the Administrative
Agent may require in connection with such test verifications; provided, that
--------
prior to a Default or Event of Default such test verifications shall be done
without any notice that the verification is being done by a secured party being
given to any of the obligors on such Receivables. At any time and from time to
time, upon the Administrative Agent's request and at the expense of the relevant
Grantor, such Grantor shall cause independent public accountants or others
satisfactory to the Administrative Agent to furnish to the Administrative Agent
reports showing reconciliations, aging and test verifications of, and trial
balances for, the Receivables.
<PAGE>
16
(b) The Administrative Agent hereby authorizes each Grantor to
collect such Grantor's Receivables, subject to the Administrative Agent's
direction and control, and the Administrative Agent may curtail or terminate
said authority at any time after the occurrence and during the continuance of an
Event of Default. If required by the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default, any payments of
Receivables, when collected by any Grantor, (i) shall be forthwith (and, in any
event, within two Business Days) deposited by such Grantor in the exact form
received, duly indorsed by such Grantor to the Administrative Agent if required,
in a Collateral Account maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent for the
account of the Lenders only as provided in Section , and (ii) until so turned
over, shall be held by such Grantor for the account of the Administrative Agent
and the Lenders, segregated from other funds of such Grantor. Each such deposit
of Proceeds of Receivables shall be accompanied by a report identifying in
reasonable detail the nature and source of the payments included in the deposit.
(c) At the Administrative Agent's request upon the occurrence of a
Default or an Event of Default, each Grantor shall deliver to the Administrative
Agent all original and other documents evidencing, and relating to, the
agreements and transactions which gave rise to the Receivables, including,
without limitation, all original orders, invoices and shipping receipts.
6.2 Communications with Obligors; Grantors Remain Liable. (a) The
----------------------------------------------------
Administrative Agent in its own name or in the name of others may at any time
communicate with obligors under the Receivables to verify with them to the
Administrative Agent's satisfaction the existence, amount and terms of any
Receivables; provided, that prior to the occurrence of an Event of Default, the
--------
Administrative Agent shall not indicate to any obligors that the verification is
being done by a secured party.
(b) Upon the request of the Administrative Agent at any time after
the occurrence and during the continuance of an Event of Default, each Grantor
shall notify obligors on the Receivables that the Receivables have been assigned
to the Administrative Agent for the ratable benefit of the Lenders and that
payments in respect thereof shall be made directly to the Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each of the Receivables to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise thereto. Neither the
Administrative Agent nor any Lender shall have any obligation or liability under
any Receivable (or any agreement giving rise thereto) by reason of or arising
out of this Agreement or the receipt by the Administrative Agent or any Lender
of any payment relating thereto, nor shall the Administrative Agent or any
Lender be obligated in any manner to perform any of the obligations of any
Grantor under or pursuant to any Receivable (or any agreement giving rise
thereto), to make any payment, to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party thereunder, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.
6.3 Pledged Stock. (a) Unless an Event of Default shall have
-------------
occurred and be continuing and the Administrative Agent shall have given notice
to the relevant Grantor of the Administrative Agent's intent to exercise its
corresponding rights pursuant to Section 6.3(b), each
<PAGE>
17
Grantor shall be permitted to receive all cash dividends paid in respect of the
Pledged Stock and all payments made in respect of the Pledged Notes, in each
case paid in the normal course of business of the relevant Issuer and consistent
with past practice, to the extent permitted in the Credit Agreement, and to
exercise all voting and corporate rights with respect to the Pledged Securities;
provided, however, that no vote shall be cast or corporate right exercised or
- -------- -------
other action taken which, in the Administrative Agent's reasonable judgment,
would impair the Collateral or which would be inconsistent with or result in any
violation of any provision of the Credit Agreement, this Agreement or any other
Loan Document.
(b) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise its rights to
the relevant Grantor or Grantors, (i) the Administrative Agent shall have the
right to receive any and all cash dividends, payments or other Proceeds paid in
respect of the Pledged Securities and make application thereof to the
Obligations in such order as the Administrative Agent may determine, and (ii)
any or all of the Pledged Securities shall be registered in the name of the
Administrative Agent or its nominee, and the Administrative Agent or its nominee
may thereafter exercise (x) all voting, corporate and other rights pertaining to
such Pledged Securities at any meeting of shareholders of the relevant Issuer or
Issuers or otherwise and (y) any and all rights of conversion, exchange and
subscription and any other rights, privileges or options pertaining to such
Pledged Securities as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Securities upon the merger, consolidation, reorganization, recapitalization or
other fundamental change in the corporate structure of any Issuer, or upon the
exercise by any Grantor or the Administrative Agent of any right, privilege or
option pertaining to such Pledged Securities, and in connection therewith, the
right to deposit and deliver any and all of the Pledged Securities with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as the Administrative Agent may determine), all
without liability except to account for property actually received by it, but
the Administrative Agent shall have no duty to any Grantor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
(c) Each Grantor hereby authorizes and instructs each Issuer of any
Pledged Securities pledged by such Grantor hereunder, if an Event of Default
shall occur and be continuing and the Administrative Agent shall give notice of
its intent to exercise its rights to such Grantor to (i) comply with any
instruction received by it from the Administrative Agent in writing that (x)
states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each Issuer
shall be fully protected in so complying, and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to the
Pledged Securities directly to the Administrative Agent.
6.4 Proceeds to be Turned Over To Administrative Agent. In addition
--------------------------------------------------
to the rights of the Administrative Agent and the Lenders specified in Section
6.1 with respect to payments of Receivables, if an Event of Default shall occur
and be continuing, all Proceeds received by any Grantor consisting of cash,
checks and other near-cash items shall be held by such Grantor for the account
of the Administrative Agent and the Lenders, segregated from other funds of such
Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to
the Administrative Agent in the exact form received by such Grantor (duly
indorsed by such Grantor to the Administrative Agent, if required). All
Proceeds received by the Administrative Agent hereunder shall be held by the
Administrative Agent in
<PAGE>
18
a Collateral Account maintained under its sole dominion and control. All
Proceeds while held by the Administrative Agent in a Collateral Account (or by
such Grantor in trust for the Administrative Agent and the Lenders) shall
continue to be held as collateral security for all the Obligations and shall not
constitute payment thereof until applied as provided in Section .
6.5 Application of Proceeds. If an Event of Default shall have
-----------------------
occurred and be continuing, at any time at the Administrative Agent's election,
the Administrative Agent may apply all or any part of Proceeds held in any
Collateral Account in payment of the Obligations in such order as the
Administrative Agent may elect, and any part of such funds which the
Administrative Agent elects not so to apply and deems not required as collateral
security for the Obligations shall be paid over from time to time by the
Administrative Agent to the Borrowers or to whomsoever may be lawfully entitled
to receive the same. Any balance of such Proceeds remaining after the
Obligations shall have been paid in full, no Letters of Credit shall be
outstanding and the Commitments shall have terminated shall be paid over to the
Borrowers or to whomsoever may be lawfully entitled to receive the same.
6.6 Code and Other Remedies. If an Event of Default shall occur and
-----------------------
be continuing, the Administrative Agent, on behalf of the Lenders, may exercise,
in addition to all other rights and remedies granted to them in this Agreement
and in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the New York UCC
or any other applicable law. Without limiting the generality of the foregoing,
the Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Administrative Agent or any Lender or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Administrative Agent or any Lender shall
have the right upon any such public sale or sales, and, to the extent permitted
by law, upon any such private sale or sales, to purchase the whole or any part
of the Collateral so sold, free of any right or equity of redemption in any
Grantor, which right or equity is hereby waived and released. Each Grantor
further agrees, at the Administrative Agent's request, to assemble the
Collateral and make it available to the Administrative Agent at places which the
Administrative Agent shall reasonably select, whether at such Grantor's premises
or elsewhere. The Administrative Agent shall apply the net proceeds of any
action taken by it pursuant to this Section 6.6, after deducting all reasonable
costs and expenses of every kind incurred in connection therewith or incidental
to the care or safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Administrative Agent and the Lenders
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Obligations, in such
order as the Administrative Agent may elect, and only after such application and
after the payment by the Administrative Agent of any other amount required by
any provision of law, including, without limitation, Section 9-504(1)(c) of the
New York UCC, need the Administrative Agent account for the surplus, if any, to
any Grantor. To the extent permitted by applicable law, each Grantor waives all
claims, damages and demands it may acquire against the Administrative Agent or
any Lender arising out of the exercise by them of any rights hereunder. If any
notice of a proposed sale or other disposition of Collateral shall be required
by
<PAGE>
19
law, such notice shall be deemed reasonable and proper if given at least 10 days
before such sale or other disposition.
6.7 Registration Rights. (a) If the Administrative Agent shall
-------------------
determine to exercise its right to sell any or all of the Pledged Stock pursuant
to Section 6.6, and if in the opinion of the Administrative Agent it is
necessary or advisable to have the Pledged Stock, or that portion thereof to be
sold, registered under the provisions of the Securities Act, the relevant
Grantor will cause the Issuer thereof to (i) execute and deliver, and cause
officers of such Issuer to execute and deliver, all such instruments and
documents, and do or cause to be done all such other acts as may be, in the
opinion of the Administrative Agent, necessary or advisable to register the
Pledged Stock, or that portion thereof to be sold, under the provisions of the
Securities Act, (ii) use its best efforts to cause the registration statement
relating thereto to become effective and to remain effective for a period of one
year from the date of the first public offering of the Pledged Stock, or that
portion thereof to be sold, and (iii) make all amendments thereto and/or to the
related prospectus which, in the opinion of the Administrative Agent, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto. Each Grantor agrees to cause such Issuer to
comply with the provisions of the securities or "Blue Sky" laws of any and all
jurisdictions which the Administrative Agent shall designate and to make
available to its security holders, as soon as practicable, an earnings statement
(which need not be audited) which will satisfy the provisions of Section 11(a)
of the Securities Act.
(b) Each Grantor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The
Administrative Agent shall be under no obligation to delay a sale of any of the
Pledged Stock for the period of time necessary to permit the Issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such Issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of all
or any portion of the Pledged Stock pursuant to this Section 6.7 valid and
binding and in compliance with any and all other applicable Requirements of Law.
Each Grantor further agrees that a breach of any of the covenants contained in
this Section 6.7 will cause irreparable injury to the Administrative Agent and
the Lenders, that the Administrative Agent and the Lenders have no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section 6.7 shall be specifically enforceable
against such Grantor, and such Grantor hereby waives and agrees not to assert
any defenses against an action for specific performance of such covenants except
for a defense that no Event of Default has occurred under the Credit Agreement.
6.8 Waiver; Deficiency. Each Grantor waives and agrees not to assert
------------------
any rights or privileges which it may acquire under Section 9-112 of the New
York UCC. Each Grantor shall
<PAGE>
20
remain liable for any deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay its Obligations and the
fees and disbursements of any attorneys employed by the Administrative Agent or
any Lender to collect such deficiency.
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc. (a)
-----------------------------------------------------------
Each Grantor hereby irrevocably constitutes and appoints the Administrative
Agent and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of such Grantor and in the name of such Grantor or in its
own name, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Agreement, and, without limiting the generality of the foregoing, each
Grantor hereby gives the Administrative Agent the power and right, on behalf of
such Grantor, without notice to or assent by such Grantor, to do any or all of
the following:
(i) in the name of such Grantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Receivable or with respect to any other Collateral and file any claim or
take any other action or proceeding in any court of law or equity or
otherwise deemed appropriate by the Administrative Agent for the purpose of
collecting any and all such moneys due under any Receivable or with respect
to any other Collateral whenever payable;
(ii) in the case of any Intellectual Property, execute and deliver,
and have recorded, any and all agreements, instruments, documents and
papers as the Administrative Agent may request to evidence the
Administrative Agent's and the Lenders' security interest in such
Intellectual Property and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in Section 6.6
or 6.7, any indorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
(v) (i) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct; (ii) ask or demand for, collect, and receive payment of
and receipt for, any and all moneys, claims and other amounts due or to
become due at any time in respect of or arising out of any Collateral;
(iii) sign and indorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (iv) commence and prosecute any suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect the
Collateral or any portion thereof and to
<PAGE>
21
enforce any other right in respect of any Collateral; (v) defend any suit,
action or proceeding brought against such Grantor with respect to any
Collateral; (vi) settle, compromise or adjust any such suit, action or
proceeding and, in connection therewith, give such discharges or releases
as the Administrative Agent may deem appropriate; (vii) assign any
Copyright, Patent or Trademark (along with the goodwill of the business to
which any such Copyright, Patent or Trademark pertains), throughout the
world for such term or terms, on such conditions, and in such manner, as
the Administrative Agent shall in its sole discretion determine; and (viii)
generally, sell, transfer, pledge and make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though
the Administrative Agent were the absolute owner thereof for all purposes,
and do, at the Administrative Agent's option and such Grantor's expense, at
any time, or from time to time, all acts and things which the
Administrative Agent deems necessary to protect, preserve or realize upon
the Collateral and the Administrative Agent's and the Lenders' security
interests therein and to effect the intent of this Agreement, all as fully
and effectively as such Grantor might do.
Anything in this Section 7.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.
(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Administrative Agent, at its option, but
without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement.
(c) The expenses of the Administrative Agent incurred in connection
with actions undertaken as provided in this Section 7.1, together with interest
thereon at a rate per annum equal to the rate per annum at which interest would
then be payable on past due ABR Loans under the Credit Agreement, from the date
of payment by the Administrative Agent to the date reimbursed by the relevant
Grantor, shall be payable by such Grantor to the Administrative Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations
and agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
7.2 Duty of Administrative Agent. The Administrative Agent's sole
----------------------------
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the New York UCC or
otherwise, shall be to deal with it in the same manner as the Administrative
Agent deals with similar property for its own account. Neither the
Administrative Agent, any Lender nor any of their respective officers,
directors, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Administrative Agent and the Lenders hereunder are solely to
protect the Administrative Agent's and the Lenders' interests in the Collateral
and shall not impose any duty upon the Administrative Agent or any Lender to
exercise any such powers. The Administrative Agent and the Lenders shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents
<PAGE>
22
shall be responsible to any Grantor for any act or failure to act hereunder,
except for their own gross negligence or willful misconduct.
7.3 Execution of Financing Statements. Pursuant to Section 9-402 of
---------------------------------
the New York UCC and any other applicable law, each Grantor authorizes the
Administrative Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Grantor in such form and in such offices as the Administrative
Agent reasonably determines appropriate to perfect the security interests of the
Administrative Agent under this Agreement. A photographic or other reproduction
of this Agreement shall be sufficient as a financing statement or other filing
or recording document or instrument for filing or recording in any jurisdiction.
7.4 Authority of Administrative Agent. Each Grantor acknowledges
---------------------------------
that the rights and responsibilities of the Administrative Agent under this
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Administrative
Agent and the Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Administrative Agent and the Grantors, the Administrative Agent
shall be conclusively presumed to be acting as agent for the Lenders with full
and valid authority so to act or refrain from acting, and no Grantor shall be
under any obligation, or entitlement, to make any inquiry respecting such
authority.
SECTION 8. MISCELLANEOUS
8.1 Amendments in Writing. None of the terms or provisions of this
---------------------
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with subsection 11.1 of the Credit Agreement.
8.2 Notices. All notices, requests and demands to or upon the
-------
Administrative Agent or any Grantor hereunder shall be effected in the manner
provided for in subsection 11.2 of the Credit Agreement; provided that any such
--------
notice, request or demand to or upon any Guarantor shall be addressed to such
Guarantor at its notice address set forth on Schedule 1.
----------
8.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the
---------------------------------------------------
Administrative Agent nor any Lender shall by any act (except by a written
instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Administrative Agent or any Lender of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Administrative Agent or such Lender would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
<PAGE>
23
8.4 Enforcement Expenses; Indemnification. (a) Each Guarantor
-------------------------------------
agrees to pay or reimburse each Lender and the Administrative Agent for all its
costs and expenses incurred in collecting against such Guarantor under the
guarantee contained in Section 2 or otherwise enforcing or preserving any rights
under this Agreement and the other Loan Documents to which such Guarantor is a
party, including, without limitation, the fees and disbursements of counsel
(including the allocated fees and expenses of in-house counsel) to each Lender
and of counsel to the Administrative Agent.
(b) Each Guarantor agrees to pay, and to save the Administrative
Agent and the Lenders harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
(c) Each Guarantor agrees to pay, and to save the Administrative
Agent and the Lenders harmless from, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement to the
extent the Borrowers would be required to do so pursuant to subsection 11.5 of
the Credit Agreement.
(d) The agreements in this Section 8.4 shall survive repayment of the
Obligations and all other amounts payable under the Credit Agreement and the
other Loan Documents.
8.5 Successors and Assigns. This Agreement shall be binding upon the
----------------------
successors and assigns of each Grantor and shall inure to the benefit of the
Administrative Agent and the Lenders and their successors and assigns; provided
--------
that no Grantor may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the
Administrative Agent.
8.6 Set-Off. Each Grantor hereby irrevocably authorizes the
-------
Administrative Agent and each Lender at any time and from time to time while an
Event of Default shall have occurred and be continuing, without notice to such
Grantor or any other Grantor, any such notice being expressly waived by each
Grantor, to set-off and appropriate and apply any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Administrative Agent or such Lender to or for the credit or the
account of such Grantor, or any part thereof in such amounts as the
Administrative Agent or such Lender may elect, against and on account of the
obligations and liabilities of such Grantor to the Administrative Agent or such
Lender hereunder and claims of every nature and description of the
Administrative Agent or such Lender against such Grantor, in any currency,
whether arising hereunder, under the Credit Agreement, any other Loan Document
or otherwise, as the Administrative Agent or such Lender may elect, whether or
not the Administrative Agent or any Lender has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. The Administrative Agent and each Lender shall notify such Grantor
promptly of any such set-off and the application made by the Administrative
Agent or such Lender of the proceeds thereof, provided that the failure to give
--------
such notice shall not affect the validity of such set-off and application. The
rights of the Administrative Agent and each Lender under this Section 8.6 are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Administrative Agent or such Lender may have.
<PAGE>
24
8.7 Counterparts. This Agreement may be executed by one or more of
------------
the parties to this Agreement on any number of separate counterparts (including
by telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
8.8 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.9 Section Headings. The Section headings used in this Agreement
----------------
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
8.10 Integration. This Agreement and the other Loan Documents
-----------
represent the agreement of the Grantors, the Administrative Agent and the
Lenders with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof and thereof not expressly
set forth or referred to herein or in the other Loan Documents.
8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.12 Submission To Jurisdiction; Waivers. Each Grantor hereby
-----------------------------------
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Grantor at its address referred to in Section 8.2 or at such other address
of which the Administrative Agent shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
<PAGE>
25
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section 8.12 any special, exemplary, punitive or consequential
damages.
8.13 Acknowledgements. Each Grantor hereby acknowledges that:
----------------
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a
party;
(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to any Grantor arising out of or in connection
with this Agreement or any of the other Loan Documents, and the
relationship between the Grantors, on the one hand, and the Administrative
Agent and Lenders, on the other hand, in connection herewith or therewith
is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among the Grantors and the Lenders.
8.14 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND
--------------------
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
8.15 Additional Grantors. Each Subsidiary of a Borrower that is
-------------------
required to become a party to this Agreement pursuant to subsection 6.10 of the
Credit Agreement shall become a Grantor for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of Annex 1 hereto.
8.16 Releases. (a) At such time as the Loans, the Reimbursement
--------
Obligations and the other then accrued Obligations shall have been paid in full,
the Commitments have been terminated and no Letters of Credit shall be
outstanding, the Collateral shall be released from the Liens created hereby, and
this Agreement and all obligations (other than those expressly stated to survive
such termination) of the Administrative Agent and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Collateral shall revert to the Grantors. At
the request and sole expense of any Grantor following any such termination, the
Administrative Agent shall deliver to such Grantor any Collateral held by the
Administrative Agent hereunder, and execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence such termination.
(b) If any of the Collateral shall be sold, transferred or otherwise
disposed of by any Grantor in a transaction permitted by the Credit Agreement,
then the Administrative Agent, at the request and sole expense of such Grantor,
shall execute and deliver to such Grantor all releases or other documents
reasonably necessary or desirable for the release of the Liens created hereby on
such Collateral. At the request and sole expense of the Borrowers, a Subsidiary
Guarantor shall be released from its obligations hereunder in the event that all
the Capital Stock of such Subsidiary Guarantor shall be sold, transferred or
otherwise disposed of in a transaction permitted by the Credit Agreement;
<PAGE>
26
provided that the Borrowers shall have delivered to the Administrative Agent, at
- --------
least ten Business Days prior to the date of the proposed release, a written
request for release identifying the relevant Subsidiary Guarantor and the terms
of the sale or other disposition in reasonable detail, including the price
thereof and any expenses in connection therewith, together with a certification
by the Borrowers stating that such transaction is in compliance with the Credit
Agreement and the other Loan Documents.
(c) Upon the occurrence of the Second Closing Date and the
contribution of all of the Capital Stock of DCI by New Intermediate Holdco to
Details Capital Corp., New Intermediate Holdco shall cease to be a Guarantor and
a Grantor without any further action on the part of New Intermediate Holdco, the
Administrative Agent or any of the Lenders. DCI shall remain a Guarantor and
Grantor for all purposes hereunder and the Capital Stock of DCI owned by Details
shall be deemed to be Pledged Stock pledged by Details pursuant to the terms
hereof. Furthermore, it is understood and agreed that prior to the Second
Closing Date DCI and Cuplex, Inc. shall be Guarantors and Grantors with respect
to the DCI Obligations only and shall not have any obligation with respect to
the Details Obligations.
<PAGE>
27
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
and Collateral Agreement to be duly executed and delivered as of the date first
above written.
DETAILS INTERMEDIATE HOLDINGS CORP.
By: /s/ Joseph P.Gisch
-------------------------------
Title:
DETAILS, INC.
By: /s/ Joseph P. Gisch
-------------------------------
Title:
DYNAMIC CIRCUITS, INC.
By: /s/ Thomas P. Caldwell
-------------------------------
Title:
CUPLEX, INC.
By: /s/ Thomas P. Caldwell
-------------------------------
Title:
COLORADO SPRINGS CIRCUITS, INC.
By: /s/ Joseph P. Gisch
-------------------------------
Title:
<PAGE>
28
DETAILS CAPITAL CORP.
By: /s/ Joseph P. Gisch
-------------------------------------
Title:
<PAGE>
Schedule 1
----------
NOTICE ADDRESSES OF GUARANTORS
<PAGE>
Schedule 2
----------
DESCRIPTION OF PLEDGED SECURITIES
PLEDGED STOCK:
Issuer Class of Stock Stock Certificate No. No. of Shares
- ------------------------- ---------------- --------------------- ---------------
PLEDGED NOTES:
Issuer Payee Principal Amount
- ------------------------------- ------------ ---------------------------
<PAGE>
Schedule 3
----------
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
Uniform Commercial Code Filings
-------------------------------
[List each office where a financing statement is to be filed]*
Patent and Trademark Filings
----------------------------
[List all filings]
Actions with respect to Pledged Stock**
----------------------------------------
Other Actions
-------------
[Describe other actions to be taken]
__________________________________
* Note that perfection of security interests in patents and trademarks
requires filings under the UCC in the jurisdictions where filings would be
made for general intangibles, as well as filings in the U.S Copyright
Office and the U.S. Patent & Trademark Office.
** If the interest of a Grantor in Pledged Stock appears on the books of a
financial intermediary, the procedures for creation of the pledge specified
in 8-313(h) of the New York UCC will have to be followed. These procedures
involve notification to the financial intermediary.
<PAGE>
Schedule 4
----------
LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE
Grantor Location
------- --------
<PAGE>
Schedule 5
----------
LOCATION OF INVENTORY AND EQUIPMENT
Grantor Locations
------- ---------
<PAGE>
Schedule 6
----------
COPYRIGHTS AND COPYRIGHT LICENSES
PATENTS AND PATENT LICENSES
TRADEMARKS AND TRADEMARK LICENSES
<PAGE>
ACKNOWLEDGEMENT AND CONSENT***
The undersigned hereby acknowledges receipt of a copy of the Guarantee
and Collateral Agreement dated as of July 23, 1998 (the "Agreement"), made by
---------
the Grantors parties thereto for the benefit of The Chase Manhattan Bank, as
Administrative Agent. The undersigned agrees for the benefit of the
Administrative Agent and the Lenders as follows:
1. The undersigned will be bound by the terms of the Agreement and
will comply with such terms insofar as such terms are applicable to the
undersigned.
2. The undersigned will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in Section 5.8(a) of
the Agreement.
3. The terms of Sections 6.3(a) and 6.7 of the Agreement shall apply
to it, mutatis mutandis, with respect to all actions that may be required of it
------- --------
pursuant to Section 6.3(a) or 6.7 of the Agreement.
[NAME OF ISSUER]
By ____________________________________
Title ________________________________
Address for Notices:
_______________________________________
_______________________________________
Fax: _________________________________
___________________________
*** This consent is necessary only with respect to any Issuer which is
not also a Grantor. This consent may be modified or eliminated with respect to
any Issuer that is not controlled by a Grantor. If a consent is required, its
execution and delivery should be included among the conditions to the initial
borrowing specified in the Credit Agreement.
<PAGE>
Annex 1 to
Guarantee and Collateral Agreement
----------------------------------
ASSUMPTION AGREEMENT, dated as of ________________, 199_, made by
______________________________, a ______________ corporation (the "Additional
----------
Grantor"), in favor of THE CHASE MANHATTAN BANK, as administrative agent (in
- -------
such capacity, the "Administrative Agent") for the banks and other financial
--------------------
institutions (the "Lenders") parties to the Credit Agreement referred to below.
-------
All capitalized terms not defined herein shall have the meaning ascribed to them
in such Credit Agreement.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Details, Inc. (the "Details"), Dynamic Circuits, Inc.
-------
("DCI"), the Lenders and the Administrative Agent have entered into a Credit
---
Agreement, dated as of July 23, 1998 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement");
----------------
WHEREAS, in connection with the Credit Agreement, the Borrowers and
certain of their Affiliates (other than the Additional Grantor) have entered
into the Guarantee and Collateral Agreement, dated as of July 23, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Guarantee
---------
and Collateral Agreement") in favor of the Administrative Agent for the benefit
- ------------------------
of the Lenders;
WHEREAS, the Credit Agreement requires the Additional Grantor to
become a party to the Guarantee and Collateral Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Guarantee and Collateral
Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Guarantee and Collateral Agreement. By executing and delivering
----------------------------------
this Assumption Agreement, the Additional Grantor, as provided in Section 8.15
of the Guarantee and Collateral Agreement, hereby becomes a party to the
Guarantee and Collateral Agreement as a Grantor thereunder with the same force
and effect as if originally named therein as a Grantor and, without limiting the
generality of the foregoing, hereby expressly assumes all obligations and
liabilities of a Grantor thereunder. The information set forth in Annex 1-A
hereto is hereby added to the information set forth in Schedules ___________****
to the Guarantee and Collateral Agreement. The Additional Grantor hereby
represents and warrants that each of the representations and warranties
contained in Section 4 of the Guarantee and Collateral Agreement is true and
correct on and as the date hereof (after giving effect to this Assumption
Agreement) as if made on and as of such date.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY,
-------------
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
_____________________________
**** Refer to each Schedule which needs to be supplemented.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By:___________________________
Name:
Title:
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this current report on Form 8-K dated August
6, 1998 of Details Capital Corp. and Details Inc. of our report dated February
20, 1998 on our audit of the consolidated financial statements of Dynamic
Circuits Inc. as of December 31, 1997 and 1996, and for each of the three years
in the period ended December 31, 1997.
PricewaterhouseCoopers LLP
San Jose, California
August 6, 1998
