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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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) September 15, 1999
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COLLEGE TELEVISION NETWORK, INC.
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Delaware 0-19997 13-3557317
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(state of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
5784 Lake Forrest Drive, Suite 275, Atlanta, Georgia 30328
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(Address of principal office)
Registrant's telephone number, including area code (404) 256-4444
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(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets.
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On July 16, 1999, College Television Network, Inc. (the "Company") entered
into a stock purchase agreement ("Purchase Agreement") to acquire all of the
issued and outstanding capital stock of Armed Forces Communications, Inc., a New
York corporation d/b/a Market Place Media and having its primary place of
business in Santa Barbara, California ("MPM"), from the shareholders of MPM,
Kevin West and Colleen Gordon (collectively, the "Sellers"), thereby making MPM
a wholly-owned subsidiary of the Company (the "Acquisition").
On August 5, 1999, the Federal Trade Commission granted termination of the
waiting period required under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, for approval of the Acquisition. Thereafter, the standard
and customary closing conditions for a transaction of the nature of the
Acquisition were met by the parties and the transaction was consummated on
August 31, 1999 (the "Closing Date").
The consideration paid to the Sellers was $30,000,000, subject to
adjustments to be made, if any, in connection with (a) a Net Book Value
determination (as set forth below)
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and/or (b) a Working Capital requirement (as set forth below). With regards to
the Net Book Value determination, the purchase price paid by the Company will be
adjusted downward, dollar-for-dollar, to the extent that the Net Book Value of
MPM on the Closing Date is less than $1,420,000. The Company is to prepare,
within 75 days following the Closing Date, a balance sheet as of the Closing
Date (the "Closing Date Balance Sheet"), and deliver the same to the Sellers,
who have until the 100th day after the Closing Date (subject to dispute
resolution provisions set forth in the Purchase Agreement) to agree in writing
to the contents of the Closing Date Balance Sheet. Should a Working Capital
adjustment be made, then the amount of such adjustment shall be included within
the determination of any Net Book Value adjustment, so that there are no
multiple reductions for the same shortfall.
With regards to the Working Capital adjustment, the purchase price paid by
the Company is to be reduced, on a dollar-for-dollar basis, to the extent that
MPM's Working Capital on the Closing Date is less than $680,000; provided,
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however, that should a Net Book Value adjustment be made, the amount of such
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adjustment will be included within any Working Capital adjustment, so that there
are no multiple reductions for the same shortfall.
On the Closing Date, MPM borrowed $15,000,000 from Canadian Imperial Bank
of Commerce ("CIBC") and its affiliates (the "Term Loan") pursuant to a Credit
Agreement (the "Credit Agreement"), dated as of August 31, 1999, among MPM,
CIBC, and affiliates of CIBC. In addition, on August 31, 1999, the Company
received a $15,000,000 investment from U-C Holdings, L.L.C. ("Holdings"), a
Delaware limited liability company, pursuant to that certain Purchase Agreement,
dated as of August 31, 1999, between the Company and Holdings. The Company used
the proceeds of the Term Loan (which MPM distributed to the Company by dividend)
and the investment by Holdings to pay the purchase price to Sellers. Of the
$30,000,000 purchase price, $2,500,000 is being held in escrow until a
determination can be made by the Company regarding adjustments to the purchase
price of MPM and for satisfaction of any post-closing claims against the
Sellers.
MPM is a leading advertising and promotions company specializing in
targeting markets such as colleges and universities. MPM sells and distributes
advertising (including print media, television, radio and Internet), to colleges
and universities and to MPM's other targeted marketplaces.
MPM's All Campus Media(R) places advertisements in college newspapers,
handles all facets of on-campus promotions and special events, offers full-
service Internet technology (including its own Web page, on-line college
publications), and provides full-service planning, buying and post analysis in
radio, spot TV and cable in major student markets throughout America.
In addition, MPM's Armed Forces Communications(R) is the leading multi-
media military marketing company, placing advertising in national military base
newspapers. MPM's American Minorities Media(R) represents and places
advertising in minority and ethnic newspapers.
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Item 5. Other Events.
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(a) Sale of New Class of Stock to U-C Holdings, L.L.C.
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As of August 27, 1999, there were issued and outstanding 14,411,755 shares
of common stock of the Company, $.005 par value per share (the "Common Stock"),
11,576,612 of which were beneficially owned by Holdings representing
approximately 80.3% of the outstanding shares of the Company's Common Stock.
Pursuant to a Purchase Agreement, dated August 31, 1999, (the "Holdings
Purchase Agreement") between the Company and Holdings, Holdings purchased
1,000,000 shares of the Company's Series A Convertible Preferred Stock ("Series
A Convertible Preferred"), $0.001 par value per share, for an aggregate purchase
price of $15,000,000. The proceeds of the investment were used to pay a portion
of the purchase price to the Sellers in connection with the Acquisition.
The conversion ratio of the Series A Convertible Preferred is computed by
multiplying the number of shares of Series A Convertible Preferred to be
converted by the $15.00 per share purchase price and dividing the result by the
conversion price of the Series A Convertible Preferred (the "Conversion Price")
then in effect with respect to such shares. On the date of issuance, the
Conversion Price was $4.50, which was a 34.9% discount from the 30-day average
market price of the Common Stock as of the date of issuance. As of the date
hereof the Series A Convertible Preferred is non-voting stock, however, after
the effective date of a Schedule 14C Information Statement to be sent to the
stockholders of the Company in connection with the ratification and approval of
the issuance of the Series A Convertible Preferred, Holdings shall gain the
right to vote the Series A Convertible Preferred on an as-converted basis to
Common Stock based upon the number of shares of Common Stock the Series A
Convertible Preferred is convertible into on the date of issuance or 3,333,333
shares of voting stock. The Series A Convertible Preferred accrues a cumulative
dividend of 12% per annum.
Additionally, the Holdings Purchase Agreement provides that the Company has
the option to sell to Holdings, subject to various conditions within the control
of Holdings, before the first anniversary of the Holdings Purchase Agreement, an
additional 266,667 shares of Series A Convertible Preferred for an aggregate
purchase price of $4,000,000, subject to increase as set forth below. Pursuant
to the Holdings Purchase Agreement, if Holdings contributes up to $6,000,000 in
cash to the Company to repay the CIBC debt in connection with the Guaranty
Agreements (as defined below), Holdings will receive up to an additional 400,000
shares of Series A Convertible Preferred at $15.00 per share. The maximum
amount of the guarantee is $6,000,000. If the Guaranty Agreements are
extinguished with Holdings paying less than $6,000,000, the amount of Series A
Convertible Preferred the Company may, at its option, sell to Holdings
increases, up to an additional $6,000,000.
The Company and Holdings entered into a Cancellation Agreement, dated
August 31, 1999, whereby the Company cancelled, for no additional consideration,
(Holdings consented
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to such cancellation) the Class D Warrant for the purchase of 135,686 shares of
Common Stock issued to Holdings on July 23, 1999.
On of the date of the issuance of the Series A Convertible Preferred, if
Holdings were to (i) convert all of the shares of Series A Convertible Preferred
it now holds or has the option to purchase; (ii) convert the 309,998 shares of
Convertible Preferred Stock of the Company ("Convertible Preferred"), $.001 par
value per share, it now holds; and (iii) exercise the warrants it holds,
including (a) the Class C Warrant issued to Holdings on October 5, 1998, and (b)
the Class C Warrant issued to Holdings on April 25, 1997, Holdings would own
18,735,431 shares of the Common Stock, or 86.9% of the Company's outstanding
Common Stock. This excludes shares issuable to Holdings pursuant to certain
Equity Protection Agreements dated April 25, 1997.
In connection with the issuance of the Series A Convertible Preferred to
Holdings, the Company obtained a fairness opinion from Texada Capital
Corporation, a copy of which is attached hereto.
The Company has approved and adopted a Plan of Reclassification (the
"Plan") whereby, on the effective date of a Schedule 14C Information Statement
to be mailed to the stockholders of the Company, the 309,998 shares of
Convertible Preferred currently owned by Holdings shall be reclassified into
309,998 shares of Series A Convertible Preferred.
The modification and reclassification of the Convertible Preferred into
shares of Series A Convertible Preferred was effectuated in order to have only
one type of preferred stock outstanding, and to eliminate the reset provision of
the Convertible Preferred, which could have adversely affected the other common
stockholders.
(b) $17,000,000 Canadian Imperial Bank of Commerce Loans.
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On August 31, 1999, MPM obtained the $15,000,000 Term Loan and a $2,000,000
revolving credit line ("Revolver Loan") from CIBC and its affiliates. The Term
Loan was distributed in full to MPM on the Closing Date. MPM also borrowed
$1,000,000 from the Revolver Loan to pay expenses associated with the
Acquisition and the loans from CIBC.
Both the Term Loan and the Revolver Loan bear interest at either the
Alternate Base Rate (which is the higher of the Prime Rate or the Federal Funds
Rate plus 0.05%) or the Eurodollar Base Rate (which is the rate for a Eurodollar
Loan appearing on Page 3750 of the Telerate screen at or about 11:00 am London
time, two business days prior to the commencement of such rate loan) plus the
applicable margin, which is variable depending on MPM meeting various financial
conditions set forth in the Credit Agreement. The Revolver Loan is due and
payable on September 30, 2004. Repayment of the Term Loan is payable quarterly
commencing June 30, 2000, and shall be paid in full on September 30, 2004,
according to the principal repayment schedule as follows:
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Date Amount
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June 30, 2000 - December 31, 2000 $1,500,000
Calendar 2001 2,250,000
Calendar 2002 3,000,000
Calendar 2003 3,750,000
January 1, 2004 - September 30, 2004 4,500,000
The Term Loan and Revolver Loan are secured by the assets of MPM and are
guaranteed by each the Company, Holdings and the managing member of Holdings,
Willis Stein & Partners, L.P. ("Willis Stein"), a Delaware limited partnership.
Each of the Company, Holdings and Willis Stein entered into guaranty agreements
in favor of CIBC (the "Guaranty Agreements"), dated as of August 31, 1999, on
behalf of MPM. The Guaranty Agreement of the Company is conditional, and
limited to circumstances in which the Company receives funds from Holdings to
repay CIBC. Additionally, the Company entered into a Pledge Agreement with
CIBC, dated as of August 31, 1999, whereby the Company pledged to CIBC the MPM
capital stock acquired by it in the Acquisition.
Item 7. Financial Statements And Exhibits.
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Audited financial statements of MPM and the pro forma financial information of
MPM and the Company shall be made available for public disclosure within sixty
(60) days of the date hereof.
Exhibit No. Description of Exhibit
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2.1 Stock Purchase Agreement dated July 16, 1999, by and among
College Television Network, Inc., Armed Forces
Communications, Inc., Kevin West and Colleen Gordon.
2.2 Escrow Agreement dated August 31, 1999, by and among College
Television Network, Inc. Colleen Gordon, Kevin West and
SunTrust Bank, Atlanta.
5.1 Purchase Agreement dated August 31, 1999, by and between
College Television Network, Inc. and U-C Holdings, L.L.C.
5.2 Cancellation Agreement dated August 31, 1999, by and between
College Television Network, Inc. and U-C Holdings, Inc.
5.3 Second Certificate of Designation, Powers, References and
Rights of the Series A Convertible Preferred Stock of College
Television Network, Inc.
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5.4 Plan of Reclassification dated August 31, 1999 (incorporated
by reference to Exhibit I to the Preliminary Schedule 14C
Information Statement filed by the Company on September
10, 1999).
5.5 Fairness Opinion from Texada Capital Corporation.
5.6 Credit Agreement dated August 31, 1999, among Armed Forces
Communications, Inc., Canadian Imperial Bank of Commerce, and
the several lenders from time to time parties thereto.
5.7 Guaranty dated as of August 31, 1999, from College Television
Network, Inc. in favor of Canadian Imperial Bank of Commerce.
5.8 Guaranty dated as of August 31, 1999, from U-C Holdings, L.L.C.
in favor of Canadian Imperial Bank of Commerce.
5.9 Guaranty dated as of August 31, 1999, from Willis Stein &
Partners, L.P. in favor of Canadian Imperial Bank of Commerce.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
September 15, 1999 COLLEGE TELEVISION NETWORK, INC.
By: /s/ Jason Elkin
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Jason Elkin
Chairman of the Board and
Chief Executive Officer
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STOCK PURCHASE AGREEMENT
Dated July 16, 1999,
by and among
COLLEGE TELEVISION NETWORK, INC.
a Delaware corporation ("Purchaser");
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ARMED FORCES COMMUNICATIONS, INC.
d/b/a MARKET PLACE MEDIA
a New York corporation ("Company");
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and
COLLEEN GORDON and KEVIN WEST
(collectively, the "Shareholders")
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TABLE OF CONTENTS
STOCK PURCHASE AGREEMENT
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ARTICLE I..................................................................... 1
SECTION 1.1 Agreement to Purchase and Sell Shares.................... 1
SECTION 1.2 Purchase Price........................................... 1
SECTION 1.3 Closing.................................................. 2
ARTICLE II.................................................................... 2
SECTION 2.1 Incorporation and Qualification of the Company........... 2
SECTION 2.2 Capital Stock of the Company............................. 3
SECTION 2.3 Subsidiaries and Other Business Entities................. 3
SECTION 2.4 Authority; Enforceability................................ 3
SECTION 2.5 Consents; No Conflicts................................... 4
SECTION 2.6 Corporate Records of the Company......................... 4
SECTION 2.7 Financial Statements; Limitations........................ 5
SECTION 2.8 Absence of Certain Changes, Events and Conditions........ 6
SECTION 2.9 Accounts Receivable...................................... 8
SECTION 2.10 Inventory................................................ 8
SECTION 2.11 Intellectual Property.................................... 8
SECTION 2.12 Tangible Personal Property............................... 9
SECTION 2.13 Material Contracts....................................... 9
SECTION 2.14 Employee Benefit Plans................................... 10
SECTION 2.15 Labor and Immigration Matters............................ 15
SECTION 2.16 Taxes.................................................... 16
SECTION 2.17 Litigation and Claims.................................... 17
SECTION 2.18 Licenses................................................. 18
SECTION 2.19 Compliance with Laws..................................... 18
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SECTION 2.20 Insurance................................................. 18
SECTION 2.21 Bank Accounts............................................. 18
SECTION 2.22 Brokers................................................... 19
SECTION 2.23 Governmental Authorization................................ 19
SECTION 2.24 Amounts Owing............................................. 19
SECTION 2.25 Employees and Consultants................................. 19
SECTION 2.26 No Undisclosed Liabilities................................ 19
SECTION 2.27 Real Property Leases...................................... 19
SECTION 2.28 Certain Interests......................................... 20
SECTION 2.29 Suppliers................................................. 20
SECTION 2.30 Powers of Attorney........................................ 20
SECTION 2.31 Environmental Compliance.................................. 21
SECTION 2.32 Absence of Certain Business Practices..................... 22
SECTION 2.33 Year 2000 Compliance...................................... 22
SECTION 2.34 Material Customers; No Change in Business Arrangements.... 23
SECTION 2.35 Other Information......................................... 23
ARTICLE III.................................................................... 23
SECTION 3.1 Incorporation and Authority of Purchaser.................. 23
SECTION 3.2 No Conflicts.............................................. 24
SECTION 3.3 Investment Purpose........................................ 24
SECTION 3.4 Brokers and Consultants................................... 24
ARTICLE IV..................................................................... 24
SECTION 4.1 Conduct of Business Prior to the Closing.................. 24
SECTION 4.2 Access to Information..................................... 25
SECTION 4.3 Consents; Satisfaction of Closing Conditions.............. 25
SECTION 4.4 Notices of Certain Events................................. 25
SECTION 4.5 Certain Taxes Arising in Connection with this Agreement... 26
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SECTION 4.6 Tax Matters................................................... 26
SECTION 4.7 Public Announcements.......................................... 26
SECTION 4.8 Hart-Scott-Rodino Filing...................................... 26
SECTION 4.9 Section 338(h)(10) Election................................... 26
SECTION 4.10 Expenses...................................................... 27
SECTION 4.11 Disclosure.................................................... 27
SECTION 4.12 [INTENTIONALLY OMITTED]....................................... 27
SECTION 4.13 Further Assurances............................................ 27
SECTION 4.14 Certain Receivables Matters................................... 27
SECTION 4.15 Working Capital Adjustment.................................... 28
ARTICLE V.......................................................................... 28
SECTION 5.1 Conditions to Obligations of the Company and Shareholders..... 28
SECTION 5.2 Conditions to Obligations of Purchaser........................ 29
ARTICLE VI......................................................................... 31
SECTION 6.1 Survival of Representations, Warranties and Covenants......... 31
SECTION 6.2 Indemnification by the Shareholders........................... 31
SECTION 6.3 Indemnification by the Purchaser.............................. 31
SECTION 6.4 General Indemnification Provisions............................ 31
SECTION 6.5 Limits on Indemnification and Liability....................... 32
SECTION 6.6 Payment of Claims............................................. 33
SECTION 6.7 No Recourse Against the Company............................... 33
ARTICLE VII........................................................................ 33
SECTION 7.1 Termination................................................... 33
SECTION 7.2 Waiver........................................................ 33
ARTICLE VIII....................................................................... 33
SECTION 8.1 Notices....................................................... 33
SECTION 8.2 Headings...................................................... 34
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SECTION 8.3 Severability.................................................. 34
SECTION 8.4 Entire Agreement.............................................. 35
SECTION 8.5 Assignment.................................................... 35
SECTION 8.6 No Third-Party Beneficiaries.................................. 35
SECTION 8.7 "Knowledge" Defined........................................... 35
SECTION 8.8 Amendment..................................................... 35
SECTION 8.9 Counterparts.................................................. 35
SECTION 8.10 Binding Agreement............................................. 35
SECTION 8.11 Governing Law; Binding Arbitration............................ 36
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as of
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the 16th day of July, 1999, by and among COLLEGE TELEVISION NETWORK, INC., a
Delaware corporation ("Purchaser"), ARMED FORCES COMMUNICATIONS, INC., a New
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York corporation d/b/a Market Place Media (the "Company"), and COLLEEN GORDON
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("Gordon") and KEVIN WEST ("West"), both individual residents of the State of
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California (collectively, the "Shareholders").
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W I T N E S S E T H:
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WHEREAS, the Shareholders own all of the issued and outstanding shares of
capital stock (the "Shares") of the Company; and
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WHEREAS, the Shareholders desire to sell, and Purchaser desires to
purchase, all of the Shares owned by the Shareholders;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged conclusively, the parties,
intending to be legally bound, agree as follows:
ARTICLE I.
PURCHASE AND SALE
SECTION 1.1 Agreement to Purchase and Sell Shares. Subject to the terms
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and conditions of this Agreement, the Shareholders agree to sell, transfer and
assign to Purchaser, and Purchaser agrees to purchase, on the Closing Date (as
defined in Section 1.3 below), all of the Shares of the Company, free and clear
of all security interests, pledges, liens, encumbrances, charges, or
restrictions on the ownership, use, voting, transfer, receipt of dividends or
other attributes of ownership.
SECTION 1.2 Purchase Price.
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(a) The aggregate purchase price (the "Purchase Price") shall be
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Thirty Million and No/100 Dollars ($30,000,000.00), subject to the adjustments
made, if any, pursuant to Section 4.15 of this Agreement. The Purchase Price
shall be allocated among the Shareholders in the manner set forth on Schedule
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1.2(a) attached.
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(b) Subject to Section 4.15 hereof, at the Closing, $27,500,000 shall
be paid to the Shareholders in cash (the "Cash Payment") in accordance with the
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allocations set forth on Schedule 1.2(a), and $2,500,000 (the "Deferred
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Payment") shall be deposited into escrow, pursuant to the terms set forth in the
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escrow agreement (the "Escrow Agreement") attached as Exhibit 1.2(b). All
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expenses associated with the escrow shall be shared equally between the
Shareholders and the Purchaser. The Shareholders shall be entitled to any
interest that accrues in the escrow account on the Deferred Payment paid to the
Shareholders.
(c) The Company shall prepare, with the assistance of
PricewaterhouseCoopers, LLP, in connection with certain specific review
procedures, a balance sheet of the Company as of the Closing Date (the "Closing
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Balance Sheet"), and related statements of income for the period then ended. The
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completion of the Closing Balance Sheet shall be conducted in accordance with
generally accepted accounting principles, except as varied by prior Company
practices as set forth on Schedule 2.7(a) hereto.
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The Closing Balance Sheet shall be used to determine the Net Book Value of the
Company as of the Closing Date. The Purchase Price shall be adjusted downward,
dollar for dollar, to the extent that the Net Book Value of the Company on the
Closing Date is less than $1,420,000. For purposes of this Agreement, "Net Book
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Value" shall mean the total assets of the Company, minus, without duplication,
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(i) the sums attributable to (a) goodwill, (b) intangible items such as
unamoritzed debt discount and expense, patents, trade and service marks,
copyrights, and research and development expenses, and (c) all reserves not
already deducted from assets, and (ii) total liabilities (total liabilities
shall include the amount of all obligations that should in accordance with
generally accepted accounting principles be classified as liabilities on the
balance sheet of the Company, including in any event, all indebtedness,
contingent or otherwise). For purposes of the Net Book Value calculation, the
World Xchange Receivable (as defined in Section 4.14 hereof) shall be valued at
its full face value. Within 75 days following the Closing Date, the Closing
Balance Sheet shall be prepared by the Company and delivered to the Shareholders
together with working papers. In the event that the Purchaser and the
Shareholders agree in writing as to the Closing Balance Sheet (after any
mutually agreed modifications thereto are made), then such Closing Balance Sheet
shall be final and binding upon the parties hereto; provided, however, that the
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determination of whether the Purchaser and the Shareholders agree as to the
Closing Balance Sheet shall be made no later than 100 days following the Closing
Date. In the event that the Shareholders and the Purchaser cannot so agree in
writing within 100 days following the Closing Date, then any items or issues in
dispute shall be resolved in accordance with Section 8.11 below. Notwithstanding
anything in this Section 1.2(c) to the contrary, should an adjustment to the
Purchase Price be made pursuant to Section 4.15 of this Agreement, the amount of
such adjustment shall be included within the determination of any adjustment to
be made pursuant to this Section 1.2(c), so that there are no multiple
reductions for the same shortfall.
SECTION 1.3 Closing. Subject to the terms and conditions hereof, the
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closing ("Closing") shall take place at such location specified by the Purchaser
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upon the later of (a) five business days following satisfaction of the
conditions set forth in sections 5.1(f) and 5.2(h) below, or (b) such other date
as shall be mutually acceptable to the Company, Purchaser and the Shareholders
(the "Closing Date").
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ARTICLE II.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SHAREHOLDERS
As an inducement to Purchaser to enter into this Agreement, the Company and
the Shareholders hereby jointly and severally represent and warrant to, and
covenant and agree with, the Purchaser as set forth below. Notwithstanding any
investigation by Purchaser, its directors, officers, employees, independent
contractors, agents or representatives, including its attorneys and accountants,
no exception disclosed to Purchaser or its directors, officers, employees,
independent contractors, agents or its representatives, including its attorneys
and accountants, shall constitute an exception to a representation or warranties
set forth in this Agreement or any other agreement related hereto, including
this Article II, unless the exception is set forth in the Schedules attached to
this Agreement.
SECTION 2.1 Incorporation and Qualification of the Company. The Company is
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a corporation duly incorporated, validly existing and in good standing under the
laws of the State of New York, and has all corporate power and authority,
together with all material governmental licenses, authorizations, consents and
approvals, required to own, operate or lease the properties and assets now
owned, operated or leased by the Company and to carry on its business. The
Company is duly qualified as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such qualification
necessary.
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All jurisdictions in which the Company is qualified as a foreign corporation are
set forth on Schedule 2.1 attached.
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SECTION 2.2 Capital Stock of the Company.
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(a) The authorized capital stock of the Company consists of 200
shares of common stock, no par value per share, of which 100 shares are issued
and outstanding. The issued and outstanding shares of common stock of the
Company (comprising all of the Shares) are owned as follows: 50 shares are owned
by Gordon, and 50 shares are owned by West. Each outstanding Share has been duly
authorized and validly issued, and is fully paid and non-assessable. There are
no outstanding (i) shares of capital stock or other voting securities of the
Company other than those owned by the Shareholders, as set forth above, (ii)
securities of the Company convertible into or exchangeable for shares of capital
stock or voting securities of the Company, (iii) options (including employee
stock options), warrants or rights of conversion or other rights, agreements,
arrangements or commitments obligating, or which may obligate, the Company to
sell or issue any additional shares of the Company's capital stock, (iv)
obligations of the Company to issue any voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company, or (v) equity equivalents, interests in the ownership or earnings, or
other similar rights of or with respect to the Company (the items in clauses
(i), (ii), (iii), (iv) and (v) being referred to collectively as the "Company
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Securities"). There are no outstanding obligations of the Company to repurchase,
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redeem or otherwise acquire any of the Company Securities.
(b) The Shareholders now have, and on the Closing Date will have,
good, valid and marketable title to the number and class of Shares listed
opposite such Shareholder's name on Schedule 2.2(b), free and clear of any Stock
---------------
Encumbrances (as defined below). The Shareholders now have, and on the Closing
Date will have, the legal right and power, and all consents, approvals and
authorizations required by law, to enter into this Agreement and to sell,
transfer and deliver such shares in the manner provided in this Agreement, and
no such action will contravene any provision of applicable law or any agreement
or other instrument binding upon such Shareholder or any writ, order or
injunction of any court or other governmental body. Upon Closing, the
Shareholders shall transfer to Purchaser all right, title and interest in and to
the Shares, (including, without limitation, the community property interest each
Shareholder may have in the Shares held by the other Shareholder), free and
clear of any Stock Encumbrances. As used in this Agreement, "Stock Encumbrances"
------------------
shall mean any security interest, pledge, lien, charge, adverse claim of
ownership or use, or any restriction on ownership, use, voting, transfer or
receipt of dividends, or any encumbrance of any kind.
SECTION 2.3 Subsidiaries and Other Business Entities. There are no
----------------------------------------
corporations, partnerships, joint ventures or other business entities in which
the Company owns, of record or beneficially, any direct or indirect equity
interest or any right, contingent or otherwise, to acquire the same.
SECTION 2.4 Authority; Enforceability.
-------------------------
(a) The Company has all corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered by the Company, and (assuming due authorization,
execution and delivery by Purchaser) constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to the effect, if any,
3
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of bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the rights of creditors generally, and the effect, if any, of general
principles of equity.
(b) The Shareholders have the full right, power and capacity to
execute, deliver and perform this Agreement and each other certificate,
agreement, document and instrument to be delivered by the Shareholders in
connection with the transactions contemplated by this Agreement (collectively,
the "Shareholder Ancillary Documents") and to consummate the transactions
-------------------------------
contemplated hereby and thereby. This Agreement and the Shareholder Ancillary
Documents have been duly and validly executed and delivered by the Shareholders
or, in the case of any Shareholder Ancillary Documents to be executed and
delivered hereafter, such Shareholder Ancillary Documents will have been duly
and validly executed and delivered as of the Closing. This Agreement and the
Shareholder Ancillary Documents each constitute, or in the case of any
Shareholder Ancillary Documents to be executed hereafter, such Shareholder
Ancillary Documents will constitute the Shareholders' legal, valid and binding
obligations, enforceable against the Shareholders in accordance with their
terms. The execution, delivery and performance by the Shareholders of this
Agreement and the Shareholder Ancillary Documents and consummation of the
transactions contemplated hereby and thereby will not, with or without the
giving of notice or the passing of time, or both, (i) violate any provision of
law, statute, rule or regulation to which the Shareholders are subject, (ii)
violate any order, judgment or decree applicable to the Shareholders, or (iii)
violate, conflict with or result in a breach or a default under, or cause the
termination of, any term or condition of any court order, trust document, will,
agreement, document or other instrument to which any Shareholder is a party or
by which any Shareholder or such Shareholder's properties are bound.
(c) The Company is not a guarantor or otherwise liable for the debts
or obligations of any other person.
SECTION 2.5 Consents; No Conflicts. Except as set forth on Schedule 2.5
---------------------- ------------
attached, the execution, delivery and performance of this Agreement by the
Company and the Shareholders and the consummation by the Company and the
Shareholders of the transactions contemplated hereby do not and will not:
(a) violate or conflict with the certificate of incorporation or
bylaws or other organizational documents of the Company;
(b) conflict with or violate any law, rule or regulation of, or any
order, writ, judgment, injunction, decree, stipulation, determination or award
entered by or with, any foreign federal, state or local governmental authority,
body, agency official, regulatory or administrative agency, body or official, or
governmental commission, court, tribunal, body, or agency (singularly and
collectively, a "Governmental Authority") applicable to the Company or its
----------------------
business;
(c) conflict with, result in any breach of, constitute a material
default under (or constitute an event which with the giving of notice or lapse
of time, or both, would become or result in a conflict, breach or default
under), or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of any security interest, pledge,
mortgage, lien, charge, adverse claim of ownership or use or any encumbrance of
any kind (collectively, an "Encumbrance") on the Company, its assets or the
-----------
Shares pursuant to any agreement, contract or other instrument, to which the
Company is a party or by which any of its assets or properties or the Shares are
bound or affected.
SECTION 2.6 Corporate Records of the Company. The stock records and minute
--------------------------------
books of the Company heretofore furnished to Purchaser by the Company correctly
show the total number of shares of
4
<PAGE>
its capital stock issued and outstanding and all corporate action taken by the
directors and shareholders of the Company (including action taken by consent
without a meeting), and contain true, correct and complete copies or originals
of the certification of incorporation and bylaws and all amendments thereto.
SECTION 2.7 Financial Statements; Limitations.
---------------------------------
(a) The Company has previously delivered to Purchaser copies of
financial statements of the Company (the "Financial Statements") consisting of
--------------------
(i) balance sheets of the Company for the twelve month periods ending December
31, 1996, December 31, 1997 and December 31, 1998 (the "Fiscal Year-End Balance
-----------------------
Sheets"), and a balance sheet (the "Interim Balance Sheet") as of May 31, 1999
- ------ ---------------------
(the "Interim Balance Sheet Date"), and (ii) related statements of income and
--------------------------
retained earnings and cash flows of the Company for the periods then ended. The
Financial Statements and notes present fairly in all respects the financial
condition of the Company (as to the balance sheets), the results of operation
for the periods then ended, the changes in stockholders' equity and the cash
flow of the Company as at the respective dates of and for the periods referred
to in such Financial Statement, all in accordance with generally accepted
accounting principles (except as set forth on Schedule 2.7 hereto), and the
------------
Financial Statements reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed in Schedule 2.7.
------------
The books of account of the Company have been kept accurately in all material
respects in the ordinary course of business, the transactions entered therein
represent bona fide transactions, and the revenues, expenses, assets and
liabilities of the Company have been properly recorded therein in all material
respects.
(b) As of January 1, 1999, and until the Closing Date, the
Shareholders have not withdrawn and will not withdraw, in the aggregate, in
excess of $500,000 as dividends, as shareholders distributions or as
compensation; provided, however, that the foregoing limitation shall not include
-------- -------
(i) distributions made to the Shareholders on April 15, 1999, in the aggregate
amount of $525,000, for the payment of the balance of their respective 1998
income tax liabilities, or (ii) distributions made to the Shareholders for the
payment of their respective 1999 year-to-date income tax liabilities resulting
from distributions by the Company, which liabilities, as of the date of this
Agreement, are expected to be in the approximate aggregate amount of $370,000;
provided further, however, that the Shareholders shall notify the Purchaser in
- -------- ------- -------
writing prior to the Closing Date should the aggregate amount of the tax
liabilities described in the foregoing subparagraph (ii) exceed $370,000. In
connection with the withdrawals described in this paragraph (b), as of January
1, 1999, the Shareholders have not and will not cause the Company, outside of
the ordinary course of the Company's business, to accelerate its accounts
receivable collections in connection with such withdrawals. There are no accrued
and unpaid dividends or other distributions, nor any obligation of the Company
to pay such distributions or distributions to the Shareholders, other than as
set forth in this paragraph (b). For the Company's fiscal year ended December
31, 1998, total accrued dividends and compensation (including amounts for the
Shareholders' income tax liabilities) paid to the Shareholders, in the
aggregate, was $2,016,000.
(c) The Company has previously delivered to Purchaser copies of
financial statements (the "Prior Financial Statements") of the Company
--------------------------
consisting of (i) balance sheets of the Company for the 12-month periods ending
December 31, 1992 (the year ending immediately prior to the Company's subchapter
S election), December 31, 1993 (the first year during which the Company's
subchapter S election was effective), and December 31, 1994 (the second year
after the Company's subchapter S election became effective) (the "Prior Balance
-------------
Sheets"), and (ii) related statements of income of the Company. The Prior
- ------
Financial Statements present fairly in all respects the financial condition of
the Company (as to the Prior Balance Sheets), the results of operations for the
periods then ended, and the changes in stockholders' equity of the Company at
the respective dates of and for the
5
<PAGE>
periods referred to in the Prior Financial Statements, all such Prior Financial
Statements having been prepared (except for changes incurred with the election
to be treated as a subchapter S corporation) on a basis consistent with
preceding years and throughout the periods involved.
(d) As of the Closing Date, the Working Capital (as defined herein)
of the Company shall be approximately $680,000. For purposes of this Agreement,
"Working Capital" shall mean current assets less current liabilities.
---------------
SECTION 2.8 Absence of Certain Changes, Events and Conditions.
-------------------------------------------------
(a) Since December 31, 1998, there has not been any material adverse
change in the condition (financial or otherwise) of the business or the
liabilities, assets, operations, results of operations, prospects or conditions
(financial or other) of the Company.
(b) Except as disclosed on Schedule 2.8 hereto, since December 31,
------------
1998, the Company has operated its business in the ordinary course consistent
with past practice and the Company has not:
(i) permitted or allowed any of its assets to be mortgaged,
pledged or subjected to any Encumbrance, other than immaterial Encumbrances
incurred in the ordinary course of business consistent with past practice;
(ii) written down, or failed to write down, or written up the
value of any of its inventory or assets;
(iii) amended, terminated, cancelled or compromised any claims
or waived any other rights, or sold, transferred or otherwise disposed of any
properties or assets, real, personal or mixed (including, without limitation,
leasehold interests and intangible property), other than the sale of inventory
in the ordinary course of business;
(iv) disposed of or permitted to lapse any patent, trademark,
assumed name, service mark, trade name or copyright application, registration or
license to its business, or under which the Company has any right or license;
(v) granted any increase in the compensation of the
employees of the Company, including, without limitation, any such increase
pursuant to any Employee Benefit Plan (as defined in Section 2.14 below), or
established or increased or promised to increase any benefits under any such
Employee Benefit Plan;
(vi) made any material changes in the customary methods of
operation of its business, including practices and policies relating to
franchising, purchasing, marketing or selling;
(vii) declared, made, set aside or paid any dividends or other
distributions (whether in cash, securities or other property) to the
Shareholders with respect to the Shares, or redeemed any of its capital stock;
(viii) incurred or assumed any indebtedness for borrowed money
or guaranteed any such indebtedness;
6
<PAGE>
(ix) issued or sold any of its stock, notes, bonds or other
securities (including treasury shares), or any option, warrant or other rights
to purchase the same;
(x) sustained any damage, destruction or other casualty loss
(whether or not covered by insurance) affecting the business or assets of the
Company;
(xi) entered into any transaction, commitment, contract or
agreement relating to its assets or business (including the acquisition or
disposition of any assets) or the relinquishment of any contract or other right,
material to the Company, other than transactions and commitments in the ordinary
course of business consistent with past practice and those contemplated by this
Agreement;
(xii) (1) granted any severance or termination pay to any
director, officer or employee of the Company, (2) entered into any employment,
deferred compensation or other similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee of the Company, (3)
increased benefits payable under any existing severance or termination pay
policies or employment agreements, or (4) increased compensation, bonus or other
benefits payable to directors, officers or employees of the Company;
(xiii) granted any option to purchase, or other right to
acquire, capital stock or any security or other instrument convertible into
capital stock of any class of the Company to any Person (as defined below);
(xiv) changed any method of accounting or accounting practice
(including in each case tax accounting), except for any such change required by
reason of a concurrent change in accordance with generally accepted accounting
principles and notice of which has been given in writing to Purchaser;
(xv) entered into, extended, amended or terminated any
Material Contract (as defined in Section 2.13 below), material agreement (other
than agreements relating to purchases of inventory in the ordinary course of
business consistent with past practice), lease, franchise, permit or license or
any material term of any outstanding security of the Company;
(xvi) made any amendment to its certificate of incorporation
or bylaws except such as may be necessary to comply with the terms of this
Agreement;
(xvii) gained knowledge of any labor dispute or pending labor
negotiation, or, to the knowledge of the Company and the Shareholders, any event
that is expected to cause or to give rise to any such labor dispute or
negotiation, or any activity or proceeding by a labor union or representative
thereof to organize any employees of the Company, which employees, to the
knowledge of the Company and the Shareholders, are not currently, and were not
at the Interim Balance Sheet Date, members of any labor union or subject to a
collective bargaining agreement, or any lockout, strike, slowdown, work stoppage
or threat thereof by or with respect to such employees;
(xviii) made any loan, advance or capital contributions to or
investment in any Person, except in the ordinary course of business consistent
with past practice; or
(xix) agreed, whether in writing or otherwise, to take any of
the actions specified in this Section 2.8(b).
7
<PAGE>
As used in this Agreement, "Person" means an individual, a corporation, a
------
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or any agency or instrumentality
thereof.
SECTION 2.9 Accounts Receivable. The accounts receivable have not been
-------------------
recorded in excess of their net realizable value on the Interim Balance Sheet.
Attached hereto as Schedule 2.9 is a list and aging of all accounts receivables
------------
of the Company. Except as set forth on Schedule 2.9 hereto, all accounts
------------
receivable set forth on the Interim Balance Sheet or incurred thereafter, up to
the Closing Date, (i) are and shall be valid obligations of the respective
makers thereof, (ii) have and shall have arisen in the ordinary course, (iii)
are and shall be fully collectible in the ordinary course of the Company's
business, and (iv) subject to the reserve for doubtful accounts, to the
knowledge of the Company and the Shareholders, need not be written off as
uncollectible.
SECTION 2.10 Inventory. The Company is a provider of services, and
---------
therefore maintains no inventory.
SECTION 2.11 Intellectual Property.
---------------------
(a) Schedule 2.11(a) lists any trademark, service mark, registration
----------------
thereof or application for registration therefor, trade name, invention, patent,
patent application, trade secret, know-how, copyright, copyright registration,
application for copyright registration, or any other similar type of proprietary
intellectual property (including, without limitation, any such right in computer
software) used in the conduct of the Company's business (collectively, the
"Intellectual Property"). Except as disclosed on Schedule 2.11(a), the Company
--------------------- ----------------
owns all such Intellectual Property subject only to the license rights described
on such Schedule. The consummation of the transactions contemplated hereby will
not alter or impair the Company's rights to own and use the Intellectual
Property. Except as disclosed on Schedule 2.11(a), no claims have been asserted,
----------------
no claims are pending, and, to the knowledge of the Company and the
Shareholders, no claims have been threatened by any Person relating to the use
of any such Intellectual Property or challenging or questioning the validity or
effectiveness of any state, federal or foreign registration of the Intellectual
Property. Listed on Schedule 2.11(a) are the state and federal registrations and
----------------
the pending applications, both domestic and foreign, owned by the Company. The
Intellectual Property of the Company is sufficient for the conduct of the
business of the Company as currently conducted.
(b) Except as listed on Schedule 2.11(b), (i) the Company has not
----------------
been a defendant in, and has not received a written charge in connection with,
any dispute, claim, suit, action or proceeding relating to its business that has
not been finally terminated prior to the date hereof and that involves a claim
of infringement of any patents, trademarks, service marks, or copyrights; (ii)
there is no other dispute, claim or infringement by the Company or, to the
knowledge of the Company and the Shareholders, any continuing infringement by
any other Person of any Intellectual Property of the Company; and (iii) no
Intellectual Property of the Company is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting the use thereof by the
Company or restricting the licensing thereof by the Company to any Person. The
Company has not entered into any agreement to indemnify any other Person against
any charge of infringement of any patent, trademark, service mark or copyright,
other than those agreements entered into in the ordinary course of business and
listed on Schedule 2.11(b).
----------------
8
<PAGE>
(c) All of the Company's employees have executed an agreement with
the Company relating to its Intellectual Property, substantially in the form
attached to Schedule 2.11(c) (collectively, the "Intellectual Property
---------------- ---------------------
Agreements").
- ----------
SECTION 2.12 Tangible Personal Property. Schedule 2.12 describes by
-------------------------- -------------
category the machinery, equipment, tools, parts, supplies, furniture, fixtures,
personalty, automobiles and other tangible personal property (the "Tangible
--------
Personal Property") used in the Company's business as of the Interim Balance
- -----------------
Sheet Date. The Tangible Personal Property is in good operating condition and
repair, normal wear and tear excepted. Except as set forth on Schedule 2.12, the
-------------
Company has good and indefeasible title to and owns the Tangible Personal
Property free and clear of all Encumbrances or similar rights of third parties.
The Tangible Personal Property of the Company is being maintained at normal and
customary levels adequate for the conduct of the business of the Company as
currently conducted and includes all Tangible Personal Property and assets
applicable to or used in connection with the business of the Company, as being
conducted on the Closing Date.
SECTION 2.13 Material Contracts.
------------------
(a) Other than as set forth on Schedule 2.13, the Company is not a
-------------
party to any of the following contracts, agreements, or obligations (the
"Material Contracts"):
------------------
(i) any store, warehouse, office and other real property
leases other than those referenced in Section 2.27 below;
(ii) any broker, distributor, dealer, sales, agency,
promotion, market research, marketing, consulting or advertising contracts;
(iii) any contracts for the purchase or sale of raw materials,
commodities, goods, merchandise, supplies, other materials or personal property
with any supplier or purchaser or for the furnishing of services to or by the
Company or otherwise related to its business that provide for annual payments in
excess of $10,000;
(iv) any contracts of employment or employee compensation,
any contracts with independent contractors or consultants, and any management
contracts which are not terminable on thirty (30) days' notice or less without
penalty or legal obligation to make any payment after the expiration of such
thirty (30) day period;
(v) any contracts which contain warranties that survive
final payment under the contract;
(vi) any indentures, mortgages, notes, loan or credit
agreements, assumption agreements, assignments of rents, or any other contract
relating in any way to indebtedness for borrowed money, whether secured or
unsecured, including but not limited to indebtedness by way of lease or
installment purchase arrangement, guarantee, indemnity, keep-well or similar
agreement, arrangement or undertaking on which others rely in extending credit,
or otherwise, or any conditional sales contract, chattel and purchase money
mortgage or other security arrangement with respect to any equipment, personal
or other property or fixtures;
(vii) any contracts between the Company and any of the
Shareholders or any entity in which a Shareholder has a direct or indirect
financial or ownership interest;
9
<PAGE>
(viii) any contracts with any Governmental Authority or any
department, agency or division thereof, to which the Company is a party;
(ix) any contract or commitment for capital expenditures or
the acquisition of fixed assets providing for payments in excess of $10,000
singly and $25,000 in the aggregate;
(x) any contract relating to the rental or use of equipment,
other personal property or fixtures, involving payment of fixed or contingent
annual rentals or sums in excess of $10,000;
(xi) any contract, order or decree that substantially limits
the freedom of the Company to compete in any line of business or with any Person
or in any area or to use or disclose any information in its possession, and
which would so limit the freedom of the Company after the Closing Date;
(xii) any contract or commitment not made in the ordinary
course of business;
(xiii) any partnership, joint venture or other similar contract
arrangement or agreement;
(xiv) any other contract (A) which is not cancelable on ninety
(90) days' or less notice without any penalty or other financial obligation or
(B) if not so cancelable, involves annual aggregate payment of $10,000 or more;
or
(xv) any franchise, development, license, territorial and
similar contracts and commitments of the Company ("Franchise Documents")
-------------------
relating to the franchising of the business of the Company. In the granting of
the franchises under the Franchise Documents, the Company has complied with all
state and federal franchise, business opportunity and similar laws and
regulations governing the franchise and license of the business of the Company.
(b) The Company has made available to Purchaser copies of each of the
Material Contracts and any amendments thereto. Except as disclosed on Schedule
--------
2.13(b), (i) the Company is not in default under or in breach of any of the
- -------
terms, conditions or warranties, express or implied, of the Material Contracts;
(ii) no condition exists or has occurred which, with the giving of notice or the
lapse of time, or both, would constitute a default or breach by the Company of
any of the terms, conditions or warranties, express or implied, of the Material
Contracts; (iii) to the Company's and each Shareholder's knowledge, no
counterparty to the Material Contracts is in default or breach thereunder; (iv)
assuming the due authorization, execution and delivery by the counterparties
thereto, and the absence of default or breach by such counterparties, all
Material Contracts are valid and binding legal obligations of the Company, in
full force and effect and enforceable against the Company in accordance with
their terms, except that the enforceability of such contracts and agreements may
be limited by (A) applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights generally and (B) equitable
principles which may limit the availability of certain equitable remedies (such
as specific performance); and (v) neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, nor
compliance with the terms and provisions hereof, will require the consent of any
Person pursuant to, or will result in the termination or impairment of, any such
Material Contract.
SECTION 2.14 Employee Benefit Plans.
----------------------
10
<PAGE>
(a) Schedule 2.14(a) attached sets forth a list of each "employee
----------------
benefit plan" (as defined by Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), and any other bonus, profit
-----
sharing, pension, compensation, deferred compensation, stock option, stock
purchase, fringe benefit, severance, post-retirement, scholarship, disability,
sick leave, vacation, individual employment, commission, bonus, payroll
practice, retention, or other plan, agreement, policy, trust fund or arrangement
(each such plan, agreement, policy, trust fund or arrangement is referred to
herein as an "Employee Benefit Plan", and collectively, the "Employee Benefit
--------------------- ----------------
Plans") that is currently in effect, was maintained since December 31, 1975, or
- -----
which has been approved before the date hereof but is not yet effective, for the
benefit of (i) directors or employees of the Company or any other persons
performing services for the Company, (ii) former directors or employees of the
Company or any other persons formerly performing services for the Company, or
(iii) beneficiaries of anyone described in (i) or (ii) (collectively, "Company
-------
Employees") or with respect to which the Company or any "ERISA Affiliate"
- --------- ---------------
(hereby defined to include any trade or business, whether or not incorporated,
other than the Company, which has employees who are or have been at any date of
determination occurring within the preceding six (6) years, treated pursuant to
Section 4001(a)(14) of ERISA and/or Section 414 of the Internal Revenue Code of
1986, as amended (the "Code"), as employees of a single employer which includes
----
the Company) has or has had any obligation on behalf of any Company Employee.
Except as disclosed on Schedule 2.14(a) attached, there are no other benefits to
----------------
which any Company Employee is entitled or for which the Company has any
obligation.
(b) The Shareholders have caused the Company to deliver to Purchaser,
with respect to each Employee Benefit Plan, true and complete copies of (i) the
documents embodying and relating to the plan, including, without limitation, the
current plan documents and documents creating any trust maintained pursuant
thereto, all amendments, investment management agreements, administrative
service contracts, group annuity contracts, insurance contracts, collective
bargaining agreements, the most recent summary plan description with each
summary of material modification, if any, and employee handbooks, (ii) annual
reports including but not limited to Forms 5500, 990 and 1041 for the last three
(3) years for the plan and any related trust, (iii) actuarial valuation reports
and financial statements for the last three years, and (iv) each communication
involving the plan or any related trust to or from the Internal Revenue Service
("IRS"), Department of Labor ("DOL"), Pension Benefit Guaranty Corporation
--- ---
("PBGC") or any other Governmental Authority including, without limitation, the
----
most recent determination letter received from the IRS pertaining to any
Employee Benefit Plan intended to qualify under Sections 401(a) or 501(c)(9) of
the Code.
(c) The Company has no obligation to contribute to or provide
benefits pursuant to, and has no other liability of any kind with respect to,
(i) a "multiple employer welfare arrangement" (within the meaning of Section
3(40) of ERISA), or (ii) a "plan maintained by more than one employer" (within
the meaning of Section 413(c) of the Code).
(d) Except as otherwise set forth on Schedule 2.14(d), the Company is
----------------
not liable for, and neither the Company nor Purchaser will be liable for, any
contribution, tax, lien, penalty, cost, interest, claim, loss, action, suit,
damage, cost assessment or other similar type of liability or expense of any
ERISA Affiliate (including predecessors thereof) with regard to any Employee
Benefit Plan maintained, sponsored or contributed to by an ERISA Affiliate (if a
like definition of Employee Benefit Plan were applicable to the ERISA Affiliate
in the same manner as it applies to the Company), including, without limitation,
withdrawal liability arising under Title IV, Subtitle E, Part 1 of ERISA,
liabilities to the PBGC, or liabilities under Section 412 of the Code or Section
302(a)(2) of ERISA.
11
<PAGE>
(e) The Company, each ERISA Affiliate, each Employee Benefit Plan and
each Employee Benefit Plan "sponsor" or "administrator" (within the meaning of
Section 3(16) of ERISA) has complied in all respects with the applicable
requirements of Section 4980B of the Code and Section 601 et seq. of ERISA (such
-- ---
statutory provisions and predecessors thereof are referred to herein
collectively as "COBRA"). Schedule 2.14(e) attached lists the name of each
----- ----------------
Company Employee who has experienced a "Qualifying Event" (as defined in COBRA)
with respect to an Employee Benefit Plan who is eligible for "Continuation
Coverage" (as defined in COBRA) and whose maximum period for Continuation
Coverage required by COBRA has not expired. Included in such list are the
current address for each such individual, the date and type of each Qualifying
Event, whether the individual has already elected Continuation Coverage and, for
any individual who has not yet elected Continuation Coverage, the date on which
such individual was notified of his or her rights to elect Continuation
Coverage. Schedule 2.14(e) also lists the name of each Company Employee who is
----------------
on a leave of absence (whether or not pursuant to the Family and Medical Leave
Act of 1993, as amended ("FAMLA")) and is receiving or entitled to receive
-----
health coverage under an Employee Benefit Plan, whether pursuant to FAMLA, COBRA
or otherwise.
(f) With respect to each Employee Benefit Plan and except as
otherwise set forth on Schedule 2.14(f) attached:
----------------
(i) each Employee Benefit Plan which is described in Section
3(2) of ERISA qualifies under Section 401(a) of the Code and has received a
determination letter from the IRS to the effect that the Employee Benefit Plan
is qualified under Section 401 of the Code and that any trust maintained
pursuant thereto is exempt from federal income taxation under Section 501 of the
Code, and nothing has occurred or is expected to occur that caused or could
cause the loss of such qualification or exemption or the imposition of any
penalty or tax liability;
(ii) all payments required by the Employee Benefit Plan, any
collective bargaining agreement or by law (including all contributions,
insurance premiums, premiums due the PBGC or intercompany charges) with respect
to all periods through the date hereof have been made;
(iii) there are no violations of or failures to comply with
ERISA and the Code with respect to the filing of applicable reports, documents,
and notices regarding the Employee Benefit Plan with the DOL, the IRS, the PBGC
or any other Governmental Authority, or any of the assets of the Employee
Benefit Plan or any related trust;
(iv) no claim, lawsuit, arbitration or other action has been
asserted or instituted or threatened in writing against the Employee Benefit
Plan, any trustee or fiduciaries thereof, the Company or any ERISA Affiliate,
any director, officer or employee thereof, or any of the assets of the Employee
Benefit Plan or any related trust;
(v) all amendments required to bring the Employee Benefit
Plan into conformity with applicable law, including, without limitation, ERISA
and the Code, have been timely adopted;
(vi) any bonding required with respect to the Employee
Benefit Plan in accordance with the applicable provisions of ERISA has been
obtained and is in full force and effect;
12
<PAGE>
(vii) the Employee Benefit Plan complies with and has been
maintained and operated in accordance with its respective terms and the terms
and the provisions of applicable law, including, without limitation, ERISA and
the Code (including rules and regulations thereunder);
(viii) no "prohibited transaction" (within the meaning of
Section 4975 of the Code and Section 406 of ERISA) has occurred or is expected
to occur with respect to the Employee Benefit Plan (and the transactions
contemplated by this Agreement will not constitute or directly or indirectly
result in such a "prohibited transaction") which has subjected or could subject
the Company, any ERISA Affiliate or Purchaser or any officer, director or
employee of the Company, any ERISA Affiliate, Purchaser or the Employee Benefit
Plan trustee, administrator or other fiduciary, to a tax or penalty on
prohibited transactions imposed by either Section 502 of ERISA or Section 4975
of the Code or any other liability with respect thereto;
(ix) the Employee Benefit Plan is not under audit or
investigation by the IRS or the DOL or any other Governmental Authority and no
such completed audit, if any, has resulted in the imposition of any tax,
interest or penalty;
(x) if the Employee Benefit Plan purports to provide
benefits which qualify for tax-favored treatment under Sections 79, 105, 106,
117, 120, 125, 127, 129 or 132 of the Code, the Employee Benefit Plan satisfies
the requirements of said Section(s);
(xi) the Employee Benefit Plan may be unilaterally amended or
terminated on no more than 90 days notice;
(xii) if the Employee Benefit Plan purports to be a voluntary
employee beneficiary association ("VEBA"), a request for a determination letter
----
for the VEBA has been submitted to and approved by the IRS that the VEBA is
exempt from federal income tax under Section 501(c)(9) of the Code, and nothing
has occurred or is expected to occur that caused or could cause the loss of such
qualification or exemption or the imposition of any tax, interest or penalty
with respect thereto;
(xiii) the Employee Benefit Plan has not been terminated under
circumstances which would result in liability to the PBGC;
(xiv) no "reportable event" (within the meaning of Section
4043 of ERISA) has occurred; and
(xv) if the Employee Benefit Plan is subject to Title IV of
ERISA, no proceeding has been or is expected to be initiated to terminate the
plan.
(g) The Company is not subject to any liens, or excise or other taxes
under ERISA, the Code or other applicable law relating to any Employee Benefit
Plan; has not ceased operations at a facility so as to become subject to the
provisions of Section 4062(e) of ERISA; has not withdrawn as a substantial
employer so as to become subject to the provisions of Section 4063 of ERISA; and
has not ceased making contributions to any Employee Benefit Plan subject to
4064(a) of ERISA to which the Company or any ERISA Affiliate made contributions
at any time during the six (6) years prior to the date hereof.
(h) With respect to each Employee Benefit Plan that is subject to
Part 3 of Title I of ERISA, Title IV of ERISA and/or Section 412 of the Code but
is not a "Multiemployer Plan" (as defined in Section 4001(a)(3) of ERISA or
Section 414(f) of the Code) (a "DB Plan"):
13
<PAGE>
(i) the present value of all vested and unvested "benefit
liabilities" (as defined in Section 4001(a)(16) of ERISA) determined (A) based
on actuarial assumptions used for funding purposes as set forth in the most
recent actuarial report; (B) as required by the PBGC if the DB Plan were
terminated; and (C) as set forth in Financial Accounting Standards Board SFAS
No. 87 using the methodology to calculate the DB Plan's accrued benefit
obligation, do not exceed the current fair market value of the assets of the DB
Plan;
(ii) except as set forth in Section 2.14(h) of the Disclosure
Schedule, no amendments or other modifications to such DB Plan or its actuarial
assumptions have been adopted since the date of such DB Plan's most recent
actuarial report;
(iii) no "accumulated funding deficiency" (as defined in
Section 302 of ERISA or Section 412 of the Code) has been incurred with respect
to the DB Plan, whether or not waived, and the DB Plan complies with all funding
requirements of the Code and ERISA; and
(iv) no excise or other taxes, interest or other charges have
been incurred or are due and owing with respect to the DB Plan because of any
failure to comply with the minimum funding standards of ERISA and the Code.
(i) In the case of any Employee Benefit Plan that is a Multiemployer
Plan, the Company has no withdrawal liability under Part 1 of Subtitle E of
Title IV of ERISA as a result of either a "complete withdrawal" (as defined in
Section 4203 of ERISA) or a "partial withdrawal" (as defined in Section 4205 of
ERISA) by the Company from such Employee Benefit Plan occurring on or prior to
the date hereof.
(j) The consummation of the transactions contemplated by this
Agreement will not give rise to any liability for any employee benefits,
including, without limitation, liability for severance pay, unemployment
compensation, termination pay or withdrawal liability, or accelerate the time of
payment or vesting or increase the amount of compensation or benefits due to any
Company Employee.
(k) No amounts payable under any Employee Benefit Plan will fail to
be deductible for federal income tax purposes by virtue of Section 280G of the
Code;
(l) Except as set forth in Schedule 2.14(e) attached, no Employee
----------------
Benefit Plan in any way provides for any benefits of any kind whatsoever (other
than under COBRA, the Federal Social Security Act or any Employee Benefit Plan
qualified under Section 401(a) of the Code) to any Company Employee who, at the
time the benefit is to be provided, is a former director or employee of, or
other provider of services to, the Company or an ERISA Affiliate (or a
beneficiary of any such person), or any other Company Employee, nor have any
representations, agreements, covenants or commitments been made to provide such
benefits.
(m) Since December 31, 1998 and through the Closing Date, except as
set forth on Schedule 2.14(m), neither the Company nor any ERISA Affiliate has,
----------------
nor will it, (i) institute or agree to institute any new employee benefit plan
or practice, (ii) make or agree to make any change in any Employee Benefit Plan,
(iii) make or agree to make any increase in the compensation payable or to
become payable by the Company or any ERISA Affiliate to any Company Employee, or
(iv) except pursuant to this Agreement and except for contributions required to
provide benefits pursuant to the provisions of the Employee Benefit Plans, pay
or accrue or agree to pay or accrue any bonus, percentage of compensation, or
other like benefit to, or for the credit of, any Company Employee.
14
<PAGE>
(n) Except as set forth on Schedule 2.14(n), any contribution,
----------------
insurance premium, excise tax, interest charge or other liability or charge
imposed or required with respect to any Employee Benefit Plan which is
attributable to any period or any portion of any period prior to the Closing
shall be reflected as a liability on the Interim Balance Sheet, including,
without limitation (i) any portion of the matching contribution required with
respect to the Company's 401(k) Plan for the plan year ending after the Closing
which is attributable to elective contributions made by participants in such
plan prior to the Closing and assuming that all participants are employed by the
Company as of the end of such plan year, and (ii) an amount equal to a pro rata
portion of the quarterly contribution requirement with respect to any DB Plan
for the quarter beginning immediately prior to the Closing, based on the number
of days that will have elapsed from such date through the Closing.
(o) Nothing contained in this Agreement shall be construed to affect
or limit any right Purchaser, the Company or any of their respective affiliates
may have after the Closing with respect to the terms and conditions of
employment of any Company Employees (including but not limited to provision of
employee benefits different from those provided through the Employee Benefit
Plans) or to terminate the employment of any Company Employee at any time or to
modify the benefits currently provided to Company Employees through any Employee
Benefit Plan.
SECTION 2.15 Labor and Immigration Matters.
-----------------------------
(a) Except as set forth on Schedule 2.15(a), (i) the Company is not a
----------------
party to any collective bargaining agreement or other labor union contract
applicable to persons employed by the Company; (ii) the Company has not breached
or otherwise failed to comply with the provisions of any collective bargaining
or union contract to which it is a party and has not received written notice of
any outstanding grievances (nor, to the knowledge of the Company and the
Shareholders, is there any basis therefor) against the Company under any such
agreement or contract; (iii) there are no unfair labor practice complaints
pending against the Company before the National Labor Relations Board or any
other Governmental Authority (nor, to the knowledge of the Company and the
Shareholders, is there any basis therefor); (iv) to the knowledge of the Company
and the Shareholders, there have been no efforts by any union, or local thereof,
to seek to represent, at any location where they do not currently represent such
employees, employees of the Company within the last five years; (v) there have
been no strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or
with respect to any employees of the Company; and (vi) neither the Company nor
the Shareholders have any knowledge of any supplier of the Company that is
involved in or threatened with or affected by any labor dispute or other
proceeding or order.
(b) With respect to all employees (as defined in Section 274a.1(g) of
Title 8, Code of Federal Regulations) of the Company for whom compliance with
the Immigration Reform and Control Act of 1986 and all regulations promulgated
thereunder ("IRCA") by an employer (as defined in Section 274a.1(g) of Title 8,
----
Code of Federal Regulations) is required, the Company has complied with respect
to the completion, maintenance and other documentary requirements of Form I-9
(Employment Eligibility Verification Form) for all current and former employees
and the reverification of the employment status of any and all employees whose
employment authorization documents indicated a limited period of employment
authorization. Schedule 2.15(b) attached contains a true and complete list of
----------------
all employees of the Company who are not citizens of the United States of
America and who are not permanent residents of the United States of America,
together with a true and complete list of the visa status and visa expiration
dates of each such employee. The Company has only employed individuals
authorized to work in the United States. The Company has not received any
written notice of any inspection or
15
<PAGE>
investigation relating to its alleged noncompliance with or violation of IRCA,
nor has it been warned, fined or otherwise penalized by reason of any failure to
comply with IRCA within the last three years.
SECTION 2.16 Taxes.
-----
(a) The following terms shall have the following meanings:
"Pre-Closing Tax Period" means any Tax period ending on or before the
----------------------
Closing Date.
"Post-Closing Tax Period" means any Tax period ending after the Closing
-----------------------
Date.
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means (i) any
--- ----- -------
net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, value added, transfer, franchise, profits, license,
withholding on amounts paid to or by the Company, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental or windfall
profit tax, custom, duty or other tax, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed by any Governmental Authority (a
"Taxing Authority") responsible for the imposition of any such tax (domestic or
----------------
foreign), (ii) liability of the Company for the payment of any amounts of the
type described in (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any period, and (iii) liability of
the Company for the payment of any amounts of the type described in (i) as a
result of any express or implied obligation to indemnify or pay the Tax
obligations of any other Person.
"Tax Asset" means any net operating loss, net capital loss, investment tax
---------
credit, foreign tax credit, charitable deduction or any other credit or tax
attribute of the Company which could reduce Taxes (including without limitation
deductions and credits related to alternative minimum Taxes, and Net Unrealized
Built-in Losses existing prior to the Closing Date).
(b) Except as set forth in Schedule 2.16(b) attached, (i) all Tax
----------------
returns, statements, reports and forms (including estimated tax returns and
reports and information returns and reports) required to be filed on or before
the Closing Date with any Taxing Authority by or on behalf of the Company
(collectively, the "Returns"), have been or shall be filed when due in
-------
accordance with all applicable laws, and no extensions have been filed to extend
the filing date of any Tax Returns; (ii) as of the time of filing, the Returns
correctly reflected and shall correctly reflect the material facts regarding the
income, business, assets, operations, activities and status of the Company, and
any other information required to be shown therein (as such information is
related to the Company's Taxes); (iii) the Company has timely paid or withheld
and remitted or shall timely pay, withhold and remit to the appropriate Taxing
Authority all Taxes due or payable on or before the Closing Date; (iv) the
accruals and reserves for Taxes reflected on the Financial Statement (excluding
any provision for deferred income taxes) (the "Tax Liability Reserve") are or
will be adequate to cover all Tax liabilities, contingent or otherwise as of the
dates of such Financial Statements and Balance Sheet; (v) all Federal, state and
foreign tax returns filed with respect to Taxable years of the Company through
the Taxable year ended December 31, 1998, have been examined and closed or are
returns with respect to which the applicable period for assessment under
applicable law, after giving effect to extensions or waivers, has expired; (vi)
the Company is not delinquent in the payment of any Tax and has not requested
any extension of time within which to file or send any Return; (vii) the Company
(or any member of any affiliated or combined group of which the Company is or
has been a member) has not been granted any extension or waiver of the
limitation period applicable to any Returns, which period (after giving effect
to such extension or waiver) has not yet expired; (viii) there has never been
and there is no claim, audit, action, suit or proceeding against or, to
16
<PAGE>
the knowledge of the Company and the Shareholders, threatened with respect to
the Company relating to any Tax; (ix) there are no requests for rulings or
determinations in respect of any Tax pending between the Company and any Taxing
Authority; (x) the Company has no interest in real property in the states in
which a Tax is imposed on the transfer of an interest in real property; (xi)
none of the property owned or used by the Company is subject to a tax benefit
transfer lease executed in accordance with Section 168(f)(8) of the Code (as
formerly in effect); (xii) none of the property owned or used by the Company is
subject to a lease, other than a "true" lease for federal income tax purposes;
(xiii) none of the property owned by the Company is "tax-exempt use property"
within the meaning of Section 168(h) of the Code; (xiv) neither the Company nor
any other Person on behalf of the Company has entered into or will enter into
any agreement or consent pursuant to Section 341(f) of the Code; (xv) there are
no liens for Taxes upon the assets of the Company except liens for current Taxes
not yet due; (xvi) the Company will not be required to include any adjustment in
taxable income for any Post-Closing Tax Period under Section 481(c) of the Code
pursuant to the provisions of any agreement entered into with any Taxing
Authority on or before the Closing Date with regard to the Tax liability of the
Company for any Pre-Closing Tax Period; (xvii) the Company has not been a member
of an affiliated group other than one of which the Company was the common
parent, or filed or been included in a combined, consolidated or unitary Return
other than one filed by the Company; (xviii) the Company is not currently under
any contractual obligation to pay the Tax obligations of any other Person, or to
pay the Tax obligations with respect to transactions relating to any other
Person, or to indemnify any other Person with respect to any Tax; and (xix) all
information set forth in the Financial Statements relating to Tax matters is
true, complete and accurate in all material respects; and (xx) any changes in
the method of accounting used by the Company for any Tax items made during the
Pre-Closing Tax Period have been approved by the Internal Revenue Service in
accordance with Section 446(e) of the Code.
(c) Schedule 2.16(c) attached sets forth a list of states,
----------------
territories and jurisdictions (whether foreign or domestic) to which any Tax is
properly payable by the Company.
(d) Without the prior written consent of Purchaser, the Company shall
not make or change any election, change an annual tax accounting period, adopt
or change any tax accounting method, file any amended Return, enter into any
closing agreement, settle any Tax claim or assessment, surrender any right to
claim a refund of Taxes, consent to any extension or waiver of the limitation
period applicable to any Tax claim or assessment, take any other action or omit
to take any action, if any such election, adoption, change, amendment,
agreement, settlement, surrender, consent or other action or omission may have
the effect of increasing the Tax liability or reducing any Tax Asset of the
Company, Purchaser or any affiliate of Purchaser.
(e) Prior to the date hereof, the Company has delivered to Purchaser
copies of the federal income tax returns filed by the Company for all Tax
periods for which the applicable statute of limitations has not expired. The
Company also has delivered to the Purchaser a notification form from the
Internal Revenue Service that the Company's election to be treated as a
subchapter S corporation was filed timely and accepted, and that such treatment
has been in effect (and shall be in effect through and including the Closing
Date) since January 1, 1993.
SECTION 2.17 Litigation and Claims.
---------------------
(a) Except as set forth on Schedule 2.17(a) attached, there are no
----------------
claims, actions, suits, arbitrations, inquiries, audits, proceedings or
investigations (or, to the knowledge of the Company and the Shareholders, any
basis therefor) by or against the Company or any of its assets or properties for
which the Company or any Shareholder has received notice pending before any
Governmental Authority
17
<PAGE>
or, to the knowledge of the Company and the Shareholders, threatened to be
brought against the Company by or before any Governmental Authority.
(b) Except as set forth on Schedule 2.17(b) attached, during the past
----------------
five years there have never been any claims, actions, suits, arbitrations,
inquiries, audits, proceedings or investigations (or, to the knowledge of the
Company and the Shareholders, any basis therefor) by or against the Company or
any of its assets or properties for which the Company or any Shareholder has
received notice with respect to products manufactured, shipped or sold by the
Company or its agents or services provided by the Company.
SECTION 2.18 Licenses. Except as disclosed on Schedule 2.18 attached, the
-------- -------------
Company is now and at the Closing will be the holder of all licenses,
authorizations, permits and certificates (the "Licenses") required by any
--------
Governmental Authority to conduct its businesses, and all of the Licenses are
now and at the Closing will be in full force and effect.
SECTION 2.19 Compliance with Laws. Except as disclosed on Schedule 2.19
-------------------- -------------
attached, the Company is not in violation of, and has not violated, any
applicable Federal, state, local or foreign or other law, regulation or order or
any other requirement of any governmental, regulatory or administrative agency
or authority or court or other tribunal relating to the Company (including, but
not limited to, any law, regulation, order or requirement relating to
securities, properties, business, products, manufacturing processes,
advertising, sales or employment practices, terms and conditions of employment,
wages and hours, safety, occupational safety, health or welfare conditions
relating to premises occupied, environmental protection, product safety and
liability or civil rights); and the Company is not now charged with, and to the
knowledge of the Company and the Shareholders, is not now under investigation
with respect to any possible violation of any applicable law, regulation, order
or requirement relating to any of the foregoing in connection with the business
of the Company, and the Company has filed all reports required to be filed with
any governmental, regulatory or administrative agency or authority on or before
the date hereof.
SECTION 2.20 Insurance. Schedule 2.20 attached contains a list and
--------- -------------
description of all policies of insurance existing or previously in existence
during the past five years and fidelity bonds relating to the assets of the
Company or the business or employees of the Company (except for any such
policies maintained to provide benefits to employees under a benefit plan or
arrangement described in Section 2.14 hereof), together with the annual premiums
payable with respect therefor. Such policies and bonds are in full force and
effect, and shall be in full force and effect on the Closing Date. All premiums
thereon have been paid and the Company has not received any notice of
cancellation with respect thereto. Except as disclosed on Schedule 2.20
-------------
attached, there are no claims pending under any of said policies or bonds or
disputes with underwriters. There are no pending or, to the knowledge of the
Company and the Shareholders, threatened terminations of, or premium increases
with respect to, any of such policies and bonds and the Company is in compliance
with all conditions contained therein. The Company has provided to Purchaser
copies of each insurance policy.
SECTION 2.21 Bank Accounts. Schedule 2.21 attached lists all of the (a)
------------- -------------
names of each bank, savings and loan, or other financial institution in which
the Company has an account, including cash contribution accounts, and the
account numbers and names of all persons authorized to draw thereon or having
access thereto, (b) locations of all lock boxes and safe deposit boxes of the
Company and the names of all persons authorized to draw thereon or having access
thereto.
18
<PAGE>
SECTION 2.22 Brokers. Except as set forth on Schedule 2.22 attached, no
------- -------------
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated under
this Agreement based upon arrangements made by or on behalf of the Company or
the Shareholders.
SECTION 2.23 Governmental Authorization. The execution, delivery and
--------------------------
performance by the Company and by each Shareholder of this Agreement requires no
action by or in respect of, or filing with, any governmental body, agency,
official or authority other than compliance with any applicable requirements of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
---
Act").
- ---
SECTION 2.24 Amounts Owing.
-------------
On or prior to the Closing Date, except for the amounts described
distributed to the Shareholders in accordance with Section 2.7(b) hereof, the
Company will have collected any amounts loaned or advanced to or receivable from
its directors, officers, the Shareholders or consultants.
SECTION 2.25 Employees and Consultants. Schedule 2.25 lists all of the
------------------------- -------------
Company's officers, directors, employees (also stating their position) and
consultants, and any and all compensation, pension or benefit arrangements,
whether written or oral, between the Company and said officers, directors,
employees and consultants as of the date of this Agreement. As used in this
Section 2.25, the term "compensation" means current annual compensation
including bonuses and all other taxable income. Attached to Schedule 2.25 are
-------------
true, complete and correct copies of all employment agreements and other similar
agreements or arrangements between the Company and any employee or independent
contractor of the Company. None of such officers, directors, employees and
consultants has informed the Company nor do the Company or the Shareholders have
reason to believe that he or she intends to terminate his or her employment or
relationship with the Company.
SECTION 2.26 No Undisclosed Liabilities. Except as set forth on Schedule
-------------------------- --------
2.26 hereto, there are no liabilities of the Company, whether accrued,
- ----
contingent, absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in any such liability, other than:
(a) liabilities disclosed and/or provided for on the Interim Balance
Sheet;
(b) liabilities incurred in the ordinary course of business
consistent with past practice since the Interim Balance Sheet Date;
(c) liabilities under this Agreement or reflected in any schedule or
document delivered in connection with this Agreement.
SECTION 2.27 Real Property Leases.
--------------------
(a) The Company does not hold any interest in real property
(including, but not limited to, any interest as a fee owner or any interest as
lessor, lessee, sublessor, sublessee, assignor, assignee or guarantor or other
surety) except for the leasehold interests described on Schedule 2.27 attached,
-------------
and such Schedule specifies in the case of each lease the name of the lessor,
sublessor, lessee or sublessee thereunder, the lease term and the basic annual
rental and other items paid or payable with respect thereto.
19
<PAGE>
(b) The Company has valid, binding and enforceable leases and
subleases with respect to all real property listed on Schedule 2.27 attached, as
-------------
leased or subleased by it free and clear of all liens, claims and encumbrances
of any kind, except that the enforceability of the leases and subleases may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights generally and (ii) equitable principles
which may limit the availability of certain equitable remedies (such as specific
performance). Except as disclosed on Schedule 2.27 attached, to the knowledge of
-------------
the Company and the Shareholders, there is no development affecting any such
properties pending or that might curtail in any material respect the present or
future use of such property for the purpose for which it is used. Except as
disclosed on Schedule 2.27 attached, neither the Company nor, to the knowledge
-------------
of the Company and the Shareholders, any other party to any such lease has
breached any material provision of, or is in default in any material respect
under, the terms of such lease, nor does there exist any event which with notice
or the lapse of time or both would constitute a material breach or cause a
default in any material respect under the terms of any such lease. Except as
disclosed on Schedule 2.27 attached, the transactions contemplated by this
-------------
Agreement do not require the consent of any lessor under, and will not result in
the termination of, any such lease.
(c) The copies of the leases heretofore provided by the Company to
Purchaser are true, correct and complete copies of such leases. Said leases have
not been modified or amended since the commencement of the terms specified in
the respective leases, except as disclosed in the copies made available to
Purchaser, and each lease continues to be valid, binding and enforceable in
accordance with its terms, except that the enforceability of the leases may be
limited by (iii) applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights generally and (iv) equitable
principles which may limit the availability of certain equitable remedies (such
as specific performance).
SECTION 2.28 Certain Interests. Except as set forth on Schedule 2.28
----------------- -------------
attached, no officer or director of the Company and no Shareholder, nor any
relative of any such officer, director or Shareholder, nor any enterprise, firm,
partnership, association, corporation or trust of which any such officer,
director, Shareholder or relative is an officer, trustee, director, partner,
employee, agent, stockholder (other than of a public corporation with respect to
which such stockholder beneficially or legally holds less than two percent (2%)
of the outstanding equity securities issued by such corporation), owner or
beneficiary, is a party to or has an interest with respect to any contract which
relates to or affects the business of the Company or has any interest in any
property, real or personal, tangible or intangible, used in or pertaining to the
business of the Company. For purposes of this Section 2.28, a relative of any
person means any person who is related by consanguinity, marriage or adoption to
such first person as a second cousin or closer relative or is a spouse of any
such relative.
SECTION 2.29 Suppliers. Schedule 2.29 attached (a) sets forth the names of
--------- -------------
the ten (10) largest suppliers, by dollar volume, of products and services to
the Company during the fiscal year ended December 31, 1998, and up to the
Interim Balance Sheet Date, (b) indicates the dollar volume and percentage of
total purchases by the Company from each such supplier during such fiscal year
and such period, and (c) sets forth the existing contractual arrangements for
continued supply with each such supplier. Except as set forth on Schedule 2.29
-------------
attached, there are no sole-source suppliers, other than manufacturers of a
specific brand, of significant products or services to the Company with respect
to which practical alternative sources of supply are not available on comparable
terms and conditions.
SECTION 2.30 Powers of Attorney. Except as set forth on Schedule 2.30, the
------------------ -------------
Company has no powers of attorney or comparable delegations of authority
outstanding in connection with its business which would not be revocable by the
Company immediately following the Closing Date.
20
<PAGE>
SECTION 2.31 Environmental Compliance. Except as disclosed on Schedule
--------
2.31 attached:
- ----
(a) No notice, notification, demand, request for information,
citation, summons, complaint or order has been issued or filed, no penalty has
been assessed and no investigation or review is pending or, to the knowledge of
the Company and the Shareholders, threatened by any governmental or other entity
(i) with respect to any alleged violation of any Environmental Laws (as
hereinafter defined) or order of any governmental entity in connection with the
conduct of the business of the Company relating to any Environmental Laws, or
(ii) with respect to any alleged failure to have any permit, certificate,
license, approval, registration or authorization required pursuant to any
Environmental Laws in connection with the conduct of the business of the
Company, or (iii) with respect to any generation, treatment, storage, recycling,
transportation, disposal or release (including a release as defined in CERCLA,
as hereinafter defined) of any Hazardous Substance (as hereinafter defined) used
in connection with the business or assets of the Company. "Environmental Laws"
------------------
means the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. (S)(S) 9601, et. seq., the Emergency Planning and
------ -- ---
Community Right-to-Know Act ("EPCRA"), 42 U.S.C. (S)(S) 11001 et seq., the
----- -- ---
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. (S)(S) 6901, et.
---- --
seq., the Clean Water Act, 33 U.S.C. (S)(S) 1251 et seq., the Clean Air Act, 42
- --- -- ---
U.S.C. (S)(S) 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. Section
-- ---
2601 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 (S)(S)
-- ---
136 et seq., and all other federal, state, or local environmental, health and/or
-- ---
safety laws, ordinances, rules, regulations and requirements pertaining to the
environment, health, safety or ecological conditions, including but not limited
to, those relating to emissions, discharges, or releases of pollutants,
contaminants, chemicals, including any Hazardous Substance or waste, into the
environment or otherwise relating to the manufacture, processing, use,
treatment, storage, disposal, transportation or handling of pollutants,
chemicals, contaminants or industrial toxic substances, Hazardous Substances or
wastes. "Hazardous Substance" means any substance or material which is (i)
-------------------
identified in Section 101(14) of CERCLA, 42 U.S.C. (S) 9601(14) and as set forth
in Title 40, Code of Federal Regulations, Part 302, as the same may be amended
from time to time, (ii) determined to be toxic, a pollutant or contaminant under
federal, state or local statute, law, ordinance, rule, or regulation or judicial
or administrative order or decision as the same may be amended from time to
time, (iii) petroleum and petroleum products and distillates, (iv) asbestos, (v)
radon, (vi) polychlorinated biphenyls, and (vii) such other materials,
substances or waste which are otherwise dangerous, hazardous, harmful or
deleterious to human health or the environment.
(b) The Company has not handled any Hazardous Substance, on any
property now or previously owned or leased by the Company (the "Properties"). No
----------
polychlorinated biphenyls ("PCBs") or urea formaldehyde was or has become
----
present at any of the Properties as a result of any activity which is or was,
directly or indirectly, within the control of the Company and no PCBs or urea
formaldehyde is or has been present at any of the Properties. No asbestos was or
has become present at any of the Properties as a result of any activity which is
or was, directly or indirectly, within the control of the Company and no
asbestos is or has been present at any such Properties. No underground storage
tank ("UST"), which has or had been used to store or has or had contained a
---
Hazardous Substance, was or has become present at any of the Properties as a
result of any activity which is or was, directly or indirectly, within the
control of the Company and there is no such UST currently in use or abandoned at
any of the Properties. There has been no release of a Hazardous Substance at, on
or under any of the Properties. No Hazardous Substance is present in a
reportable or threshold planning quantity, where such a quantity has been
established by Environmental Laws, at, on or under any of the Properties as a
result of any activity which is or was, directly or indirectly, within the
control of the Company and no such Hazardous Substance in such quantity was or
has become present at any of the Properties.
21
<PAGE>
(c) The Company has not transported or arranged for the
transportation (directly or indirectly) of any Hazardous Substance to any
location which is listed or proposed for listing on the National Priorities List
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended ("CERCLA"), the Comprehensive Environmental Response,
------
Compensation and Liability Information System ("CERCLIS") or on any similar
-------
state list, or which is the subject of any federal, state or local enforcement
action or other investigation which may lead to claims for clean-up costs,
remedial work, damages to natural resources or for personal injury claims,
including, but not limited to, claims under CERCLA.
(d) No oral or written notification of a release of a Hazardous
Substance has been filed by or on behalf of the Company and none of the
Properties is, during the period of ownership or lease by the Company, listed
or, to the knowledge of the Company and the Shareholders, proposed for listing
on the National Priorities List promulgated pursuant to CERCLA, on CERCLIS or on
any similar state list of sites requiring investigation or clean-up.
(e) There are no environmental Encumbrances on any asset of the
Company, no government actions have been taken or are in process which could
subject any of such assets to such Encumbrances, and no notice or restriction
relating to the presence of a Hazardous Substance is required to be placed in
any deed to such of said assets title to which would be conveyed by use of a
deed.
(f) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by or which are in the possession of
the Company in relation to any of the Properties.
SECTION 2.32 Absence of Certain Business Practices. Neither the Company
-------------------------------------
nor any of its affiliates has given or offered to give any thing of value to any
governmental official, political party or candidate for government office, nor
taken any action which would constitute a violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any similar law.
SECTION 2.33 Year 2000 Compliance. Each system, comprising of software,
--------------------
hardware, databases, or embedded control systems (microprocessor controlled,
robotic or other device)(collectively, a "System") that constitutes any part of,
------
or is used in connection with the use, operation or enjoyment of any material
tangible or intangible asset or real property of the Company and its
subsidiaries (if any) (i) is designed (or has been modified) to be used prior to
and after January 1, 2000, (ii) will operate without material error arising from
the creation, recognition, acceptance, calculation, display, reporting, storage,
retrieval, accessing, comparison, sorting, manipulation, processing or other use
of dates, or date-based, date-dependent or date-related data, including, but not
limited to, century recognition, day-of-the-week recognition, leap years, date
values and interfaces of date functionalities, and (iii) will not be adversely
affected by the advent of the year 2000 or subsequent years, the advent of the
twenty-first century or the transition from the twentieth century through the
year 2000 and into the twenty-first century (collectively, items (i) through
(iii) are referred to herein as "Year 2000 Compliant"). To the knowledge of the
-------------------
Company and the Shareholders and except as set forth on Schedule 2.33, no System
-------------
that is material to the business, finances or operations of the Company or any
subsidiary receives data from or communicates with any component or system
external to itself (whether or not such external component or system is the
Company's, any subsidiary's or any third party's) that is not itself Year 2000
Compliant excepting the parts of the external component or system within which
noncompliance will have no effect on the data or communications sent to the
Company or its subsidiaries, nor on the Systems of the Company or its
subsidiaries. To the knowledge of the Company and the Shareholders, and except
as set forth on Schedule 2.33, all licenses for the use of any System-related
-------------
software, hardware, databases or embedded
22
<PAGE>
control system are certified by the manufacturer to be Year 2000 Compliant and
to contain the capabilities required to enable them to be year 2000 Compliant
within the Company and subsidiary computer Systems (hardware and software), or
the licenses permit the Company or its subsidiaries or a third party to make all
modifications, bypasses, de-bugging, work-arounds, repairs, replacements,
conversions or corrections necessary to permit the System to operate compatibly,
in conformance with their respective specifications, and to be Year 2000
Compliant. Except as set forth on Schedule 2.33, to the knowledge of the Company
-------------
and the Shareholders, the Company shall not incur any material expense arising
from or relating to the failure of any of its Systems as a result of not being
Year 2000 Compliant.
SECTION 2.34 Material Customers; No Change in Business Arrangements.
------------------------------------------------------
Schedule 2.34 lists the top twenty customers (based on revenues) of the Company
- -------------
for the fiscal years ended December 31, 1997, and December 31, 1998. Except as
set forth on Schedule 2.34, neither the Company nor any Shareholder has received
-------------
any notice or communication that any of the Company's top 100 customers (based
on annual revenues during the 12-month period ended December 31, 1998) intends
to reduce the level of business between the Company and customer by 20% or more,
as compared to the Company's revenues derived from such customer during the
prior 12-month period. Each product or service provided by the Company has been
in conformity with all applicable contractual commitments and expressed or
implied warranties, and the Company has no liability (and there is not basis for
any present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against the Company giving rise to any liability) for
warranty services or other damages in connection therewith, subject only to the
reserve for warranty claims set forth on the face of the Fiscal Year End Balance
Sheets (rather than in notes thereto) as adjusted for the passage of time to the
Closing Date, in accordance with past custom or practice of the Company.
SECTION 2.35 Other Information. No document or item referenced in this
-----------------
Article II or referred to in any schedule or exhibit hereto, nor any information
set forth in any such schedule, exhibit, document or item, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements of the Company or any Shareholder contained
therein, in light of the circumstances under which they were made, not
misleading. There is no fact known to the Shareholders which has specific
application to the Company (other than general economic or industry conditions)
and which materially adversely affects or, so far as the Shareholders can
reasonably foresee, materially threatens the assets, business, condition
(financial or other), result of operations or prospects of the Company which has
not been described in this Agreement or the schedules hereto or otherwise
disclosed in writing to the Purchaser.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As an inducement to the Company and the Shareholders to enter into this
Agreement, Purchaser represents and warrants to the Company and the Shareholders
as follows:
SECTION 3.1 Incorporation and Authority of Purchaser. Purchaser is a
----------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all necessary corporate power and authority to
enter into this Agreement, to carry out its obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Purchaser, and (assuming due authorization, execution
and delivery by each Shareholder and the Company) constitutes a legal, valid and
binding obligation of the Purchaser, enforceable against Purchaser in accordance
with its terms, subject to the effect, if any, of bankruptcy,
23
<PAGE>
insolvency, reorganization, moratorium and other similar laws affecting the
rights of creditors generally and the effect, if any, of general principles of
equity.
SECTION 3.2 No Conflicts. The execution, delivery and performance of this
------------
Agreement by Purchaser do not and will not (a) violate or conflict with the
certificate of incorporation, bylaws or other organizational documents of
Purchaser; (b) assuming the requirements under the HSR Act (as defined in
Section 2.23 above) are met, conflict with or violate any law, rule or
regulation of, or any order, writ, judgment, injunction, decree, stipulation,
determination or award entered by or with, any Governmental Authority applicable
to Purchaser; or (c) conflict with, result in any breach of, constitute a
default under (or constitute an event which with the giving of notice or lapse
of time, or both, would become or result in a conflict, breach or default
under), any agreement or obligation to which Purchaser is a party or subject and
which would affect Purchaser's ability or authority to consummate the
transactions contemplated hereby.
SECTION 3.3 Investment Purpose. Purchaser is acquiring the Shares solely
------------------
for the purpose of investment and not with a view to, or for offer of sale in
connection with, any distribution thereof. Purchaser acknowledges that the
Shares have not been registered, and represents and warrants that Purchaser is
an "accredited investor" as such term is defined in rule 501 of Regulation D
under the Security Act, as amended.
SECTION 3.4 Brokers and Consultants. The Purchaser has employed no broker
-----------------------
or agent in connection with this Agreement, and agrees to indemnify the other
parties hereto against all loss, cost, damages or expense arising out of claims
for fees or commissions of brokers employed or alleged to have been employed by
the Purchaser.
ARTICLE IV.
ADDITIONAL COVENANTS
SECTION 4.1 Conduct of Business Prior to the Closing. From the date hereof
----------------------------------------
through the Closing Date, the Company and the Shareholders covenant and agree
that the Company shall conduct its business in the ordinary course consistent
with past practice and shall use its best efforts to preserve intact its
business organizations and relationships with third parties and to keep
available the services of its present officers and employees. Without limiting
the generality of the foregoing, from the date hereof until the Closing Date,
the Company will not (i) issue any shares of the stock, warrants or stock
equivalents or declare or make any payment on account of the purchase,
redemption, retirement or acquisition of any Shares, (ii) declare any dividends
or make any distributions to its Shareholders (other than those distributions
made to the Shareholders in accordance with Section 2.7(b) hereof), (iii) incur
any indebtedness from borrowed money except in the ordinary course of business
consistent with past practice, (iv) subject the assets of the Company to any
additional liens or encumbrances, (v) adopt or propose any change in its
articles of incorporation or bylaws, (vi) merge or consolidate with any other
Person, acquire a material amount of assets of any other Person or, except as
listed on Schedule 4.1 attached, make any additional capital expenditure or
------------
acquire any additional fixed assets, (vii) sell, lease, license or otherwise
dispose of any material assets or property except (1) pursuant to existing
contracts or commitments and (2) in the ordinary course consistent with past
practice; provided, however, that in no event will the Company sell, lease,
-------- -------
license or otherwise dispose of any asset or assets having a value greater than
$50,000 singly or $100,000 in the aggregate without the prior written consent of
Purchaser; and provided further, that nothing in this subparagraph (vii) shall
-------- -------
prevent the Company from selling inventory in the ordinary course of its
business consistent with past practice, (viii) enter into or renew (whether by
exercise of option or otherwise) or amend in any respect any Material Contract
or any lease
24
<PAGE>
identified in Section 2.27 above without the prior written consent of Purchaser,
(ix) increase compensation or benefits to any officer, director or employee of
the Company or pay any bonus, severance or termination pay to such officer,
director or employee of the Company, (x) take or agree or commit to take any
action that would make any representation or warranty of the Company or any
Shareholder inaccurate in any respect at or prior to the Closing Date
(including, without limitation the representation and warranty set forth in
Section 2.8 (Absence of Certain Changes, Events and Conditions) above) or omit
or agree or commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any respect at any such
time, or (xi) permit the Company to agree or commit to do any of the foregoing.
SECTION 4.2 Access to Information.
---------------------
(a) From the date hereof through the Closing Date, the Company and
Shareholders agree to (i) provide Purchaser and its independent accountants,
legal counsel, environmental consultants and other authorized representatives
with full access to the Company's properties, facilities, books, records,
financial operating data, contracts and other materials of the Company at
reasonable times for the purpose of Purchaser's conducting a complete and
thorough investigation, analysis and review of the Company, (ii) furnish to
Purchaser, its independent accountants, legal counsel, environmental consultants
and other authorized representatives such financial and operating data and other
information relating to the Company as such Persons may reasonably request, and
(iii) instruct the employees, counsel and financial and other advisors of the
Company to cooperate with Purchaser in its investigation of the Company;
provided, however, that no investigation pursuant to this Section shall limit or
- -------- -------
otherwise affect any representation or warranty given by the Company and the
Shareholders hereunder.
(b) From the date hereof through the Closing Date, and at such times
as are mutually agreed upon between the Company and the Shareholders, on the one
hand, and the Purchaser, on the other hand, the Purchaser shall be permitted to
contact certain of the Company's customers selected by the Purchaser, for the
purposes of investigating customer satisfaction (the "Customer Satisfaction
---------------------
Investigation"). During the conduct of its Customer Satisfaction Investigation,
- -------------
if the Purchaser determines, in its sole discretion, that the results thereof
are unfavorable and will cause the Purchaser not to consummate the closing of
the transactions contemplated by this Agreement, the Purchaser promptly shall
notify the Company and the Shareholders of such results and its determination
not to consummate the transactions contemplated hereby.
SECTION 4.3 Consents; Satisfaction of Closing Conditions. The Shareholders
--------------------------------------------
and the Company will use their best efforts to obtain, at the Shareholders' and
Company's sole cost and expense, all consents (including, without limitation,
Landlord Consents (as defined in Section 5.2(d) below)) from third parties
necessary or advisable in order to permit the consummation of the transactions
contemplated in this Agreement without impairing the validity or effectiveness
of any lease or other contract to which the Company is a party, and to obtain
the satisfaction on or before the Closing Date of the conditions specified in
Section 5.2.
SECTION 4.4 Notices of Certain Events. The Company and the Shareholders
-------------------------
shall promptly notify Purchaser of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
25
<PAGE>
(b) any notice or other communication (other than any routine or
incidental notice or communication) from any governmental or regulatory agency
or authority in connection with the transactions contemplated by this Agreement;
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the knowledge of the Company and the Shareholders, threatened
against, relating to or involving or otherwise affecting the Company which, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to Section 2.8 hereof, or which relate to the consummation of
the transactions contemplated by this Agreement; and
(d) any fact or circumstance which would make any representation or
warranty untrue or inaccurate in any material respect as of the Closing Date.
SECTION 4.5 Certain Taxes Arising in Connection with this Agreement. All
-------------------------------------------------------
transfer, documentary, sales, use, stamp, registration, value added and other
such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement (including any state gains tax, city transfer
tax, and any similar Tax imposed in other states or subdivisions) shall be borne
and paid by the Shareholders when due.
SECTION 4.6 Tax Matters. The Company will prepare the tax returns for all
-----------
periods ended on or prior to the Closing, and the Purchaser will prepare all tax
returns for periods ending after the Closing. In addition, the Purchaser will
provide the Shareholders with access to such of its books and records as may be
reasonably requested by the Shareholders in connection with federal, state and
local tax matters relating to periods prior to the Closing. The parties hereto
acknowledge that upon the Closing of the transactions contemplated by this
Agreement, the Company's status as a subchapter S corporation for federal income
tax purposes shall cease and that the taxable year of the Company in which such
Closing occurs shall be divided into two (2) short taxable years (an S short
year and a C short year). Except as may be set forth in Section 4.9 below, the S
tax returns and the prior year returns shall be prepared in all respects
consistently with the past practices of the Company.
SECTION 4.7 Public Announcements. Prior to the Closing, no party to this
--------------------
Agreement shall make any public announcement of the transactions contemplated by
this Agreement or otherwise communicate with any news media without prior
written agreement of the Company and Purchaser except (a) in a mutually
agreeable manner to the employees of the Company and (b) to the extent that such
announcement is required by law. The Company and Purchaser shall cooperate as to
the timing and contents of any such announcement.
SECTION 4.8 Hart-Scott-Rodino Filing. Purchaser, the Company and the
------------------------
Shareholders (as applicable) shall make appropriate filings of the Notification
and Report Form pursuant to the HSR Act with respect to the transactions
contemplated hereby promptly upon the execution by the parties of this
Agreement, and in no event later than within five business days following the
date hereof. The Purchaser shall pay all of the filing costs and expenses of an
"acquiring person" (as such term is defined in the HSR Act).
SECTION 4.9 Section 338(h)(10) Election. At Purchaser's option, the
---------------------------
Shareholders agree to join with the Purchaser in making a timely election on
Form 8023 under Sections 338(g) and 338(h)(10) of the Code (and any
corresponding elections under state, local or foreign law) (collectively, a
"Section 338(h)(10) Election") with respect to the purchase and sale of the
---------------------------
Shares of the Company hereunder, and if the Purchaser makes such an election,
the Purchaser shall pay to the Shareholders as additional
26
<PAGE>
consideration any additional income tax due by the Shareholders as a result of
such election, including any additional taxes that may be assessed by federal or
state taxing authorities upon later examination of tax returns, and including
any penalties and additions to tax that may result from such examination and
assessment. The total payment to the Shareholders shall be "grossed-up" to
cover the additional income taxes that may be payable upon the receipt of this
payment of additional consideration in an amount sufficient to place the
Shareholders in the same after-tax position as if no such additional taxes or
other amounts were due from the Shareholders. It is further agreed that any
taxes imposed on the Company, including built-in gains tax, that may result from
such election are the sole responsibility of the Purchaser, and that no decrease
or offset of any kind shall be made against the above payment to the
Shareholders for additional taxes. The parties agree that in the event of a
Section 338(h)(10) Election, the Purchase Price and the liabilities of the
Company shall be allocated to the assets of the Company for tax purposes in a
manner consistent with such election. The Purchaser and the Shareholders will
file all returns (included amended returns and claims for refunds) and
information reports in a manner consistent with such allocation.
SECTION 4.10 Expenses. The Purchaser will pay the fees, expenses and
--------
disbursements of the Purchasers and its agents, representatives, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement and any amendments hereto. The Shareholders will pay the fees,
expenses and disbursements of the Company and the Shareholders and their
respective agents, representatives, financial advisors, accountants and counsel
(including, without limitation, the obligations described on Schedule 2.22)
-------------
incurred in connection with the execution, delivery and performance of this
Agreement and any amendments hereto.
SECTION 4.11 Disclosure. Each Shareholder acknowledges and agrees that the
----------
due diligence review and inspections by Purchaser and its representatives shall
not waive, or release the Shareholders from, any of the Shareholders'
responsibilities, warranties or covenants under this Agreement. The disclosures
in the schedules to this Agreement, and those in any supplement thereto, shall
relate only to the representations and warranties in the section of this
Agreement to which each schedule expressly relates and to no other
representation or warranty. To the extent that any matter is to be "specifically
provided," "set forth" or "identified" in any schedule to this Agreement, or
subject to words of similar import, such matter must be specifically set forth
or identified in the schedule and will not be effectively disclosed merely by
virtue of appearing in a document included in such schedule.
SECTION 4.12 [INTENTIONALLY OMITTED]
SECTION 4.13 Further Assurances. At any time on or after the Closing Date,
------------------
each party will execute and deliver any further assignments, conveyances and
other assurances, documents and instruments of transfer reasonably requested by
another party to consummate the transactions contemplated hereby.
SECTION 4.14 Certain Receivables Matters. Notwithstanding anything in this
---------------------------
Agreement or any disclosure schedule or exhibit hereto to the contrary, with
respect to that certain outstanding account receivable balance in the
approximate amount of $882,889.80 due from World Xchange (the "World Xchange
-------------
Receivable") relating to an advertising campaign which ran from December 1998 to
- ----------
April 1999, the Purchaser agrees that, after the Closing, it shall cause the
Company to use its reasonable best efforts (which efforts shall not include,
without limitation, the Company's entering into reduced supplier rates or future
quotas on the placement of other advertising, commencing legal action or
otherwise expending funds on collection efforts by third parties) to collect
such receivable. The parties hereto agree that should such World Xchange
Receivable not be collected in full by the Company within 120 days after the
27
<PAGE>
Closing Date (net of any recoveries or credits from publishers), upon thirty
days' written notice thereof from the Purchaser to the Shareholders, the amount
of the World Xchange Receivable remaining outstanding, together with reasonable
costs expended by the Company in its efforts to collect the World Xchange
Receivable, shall be paid by the Shareholders to the Company in immediately
available funds, in which case such receivable shall be assigned to the
Shareholders of the Company.
SECTION 4.15 Working Capital Adjustment. The Purchase Price to be paid by
--------------------------
the Purchaser to the Shareholders shall be adjusted as follows: to the extent
that the Working Capital of the Company is less than $680,000, the Purchase
Price shall be reduced, on a dollar-for-dollar basis, by such deficiency;
provided, however, that notwithstanding anything in this Section 4.15 to the
contrary, should an adjustment to the Purchase Price be made pursuant to Section
1.2(c) of this Agreement, the amount of such adjustment shall be included within
the determination of any adjustment to be made pursuant to this Section 4.15, so
that there are no multiple reductions for the same shortfall. For purposes of
the Working Capital calculation, the World Xchange Receivable (as defined in
Section 4.14 hereof) shall be valued at its full face value.
ARTICLE V.
CONDITIONS TO CLOSING
SECTION 5.1 Conditions to Obligations of the Company and Shareholders.
---------------------------------------------------------
The obligations of the Company and the Shareholders to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment,
at or prior to the Closing Date (or on such other date as may be agreed by the
parties), of each of the following conditions (any one or more of which may be
waived by the Shareholders in their sole discretion).
(a) Representations and Warranties; Covenants Performed; Officer's
--------------------------------------------------------------
Certificate. The representations and warranties of Purchaser contained in this
- -----------
Agreement shall be true and correct as of the Closing Date with the same force
and effect as if made as of the Closing Date, and all the covenants contained in
this Agreement to be complied with by Purchaser on or before the Closing Date
shall have been complied with, and the Shareholders shall have received a
certificate to such effect signed by a duly authorized officer of Purchaser.
(b) Cash Payments. The Shareholders shall have received the aggregate
-------------
Cash Payments, as set forth in Section 1.2(b) hereof.
(c) Deferred Payment. Purchaser shall have paid the Deferred Payment
----------------
into escrow under the Escrow Agreement.
(d) Escrow Agreement. Purchaser and the escrow agent shall have
----------------
executed an Escrow Agreement in the form of Exhibit 1.2(b) attached.
--------------
(e) Consulting Agreements. At the Closing, the Company shall have
---------------------
entered into a six-month consulting agreements with each of Gordon and West, in
the forms of Exhibits 5.1(e)(i) and 5.1(e)(ii) attached (the "Consulting
------------------ ---------- ----------
Agreements").
- ----------
(f) HSR Act. Any filing and waiting period (and any extension
-------
thereof) requirements under the HSR Act applicable to the consummation of the
transactions contemplated hereby shall have expired or been terminated and no
order, ruling or decision shall have been issued under the HSR Act prohibiting
the consummation of the transactions contemplated hereby.
28
<PAGE>
(g) Legal Opinion. The Shareholders and the Company shall have
-------------
received from counsel to the Purchaser a legal opinion, addressed to the
Shareholders and the Company and dated the Closing Date, containing opinions set
forth in Exhibit 5.1(g) attached hereto.
--------------
SECTION 5.2 Conditions to Obligations of Purchaser. The obligations of the
--------------------------------------
Purchaser to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment, at or prior to the Closing Date (or on such other
date as may be agreed by the parties), of each of the following conditions (any
one or more of which may be waived by Purchaser in its sole discretion):
(a) Representations and Warranties; Covenants Performed;
----------------------------------------------------
Shareholders' Certificates; Officer's Certificate. The representations and
- -------------------------------------------------
warranties of the Company and the Shareholders contained in this Agreement shall
be true and correct as of the Closing Date with the same force and effect as if
made as of the Closing Date, and all the covenants contained in this Agreement
to be complied with by the Company and the Shareholders on or before the Closing
Date shall have been complied with, and the Purchaser shall have received a
certificate to such effect from each Shareholder and from an officer of the
Company.
(b) Stock Certificates. Each Shareholder shall have executed and
------------------
delivered to Purchaser free and clear of all Stock Encumbrances a certificate or
certificates representing the Shares to be sold by such Shareholder to Purchaser
hereunder, duly endorsed for transfer to the Purchaser.
(c) Consents. The Company and/or the Shareholders shall have obtained
--------
and delivered to the Purchaser written consents to the transaction contemplated
herein from, and there shall have been given any required notices of the
transaction contemplated herein to, the appropriate party to or issuer of each
Material Contract, agreement, plan, policy, lease (other than the leases
referred to in paragraph (d) below), permit, license and other document or
instrument specified in any schedule hereto as requiring such consent or notice,
without change in the financial terms thereof or, in the aggregate, any cost to
the Company payable by the Company following the Closing in connection with
obtaining such consents or giving such notices. No court, arbitrator or
governmental body, agency or official shall have issued any order or adopted any
statute, rule or regulation which, in the opinion of the Purchaser, would
materially restrain the operation by the Purchaser of the business of the
Company after the Closing Date.
(d) Consents of Lessors. The Company and the Shareholders shall have
-------------------
obtained and delivered to the Purchaser written consents to the transaction
contemplated by this Agreement of, or notice of the transaction contemplated by
this Agreement to, lessors to the Leases. Each lessor under any lease referred
to in this paragraph shall have executed and delivered to the Company and
Purchaser a certificate substantially in the form of Exhibit 5.2(d) attached
--------------
hereto (the "Landlord Consents").
-----------------
(e) Acquisition Restrictive Covenant Agreements. Each Shareholder
-------------------------------------------
shall have executed and delivered to Purchaser an acquisition restrictive
covenant agreement in favor of the Purchaser, agreeing for a period of five (5)
years following the Closing Date not to directly or indirectly engage in a
business competitive with the Company within the geographic area referred to
therein, in the form of Exhibit 5.2(e) attached hereto (the "Acquisition
-------------- -----------
Restrictive Covenant Agreements").
- -------------------------------
(f) Legal Opinion. The Purchaser shall have received from counsel to
-------------
the Company and Shareholders a legal opinion, addressed to the Purchaser and
dated the Closing Date, containing opinions set forth in Exhibit 5.2(f) attached
--------------
hereto.
29
<PAGE>
(g) Escrow Agreement. The Shareholders and the escrow agent shall
----------------
have executed the Escrow Agreement.
(h) HSR Act. Any filing and waiting period (and any extension
-------
thereof) requirements under the HSR Act applicable to the consummation of the
transactions contemplated hereby shall have expired or been terminated and no
order, ruling or decision shall have been issued under the HSR Act prohibiting
the consummation of the transaction contemplated hereby or materially
interfering with or imposing any conditions on Purchaser's ownership of, or
ability to supervise the operations of, the Company.
(i) Corporate Minute Books; Secretary's Certificate. The Company
-----------------------------------------------
shall have delivered the original corporate minute books of the Company to the
Purchaser. The corporate minute books shall contain minutes and consents of all
Board and shareholders' actions and meetings, cancelled stock certificates of
all previously issued, but no longer outstanding, stock certificates of the
Company, a recently issued good standing certificates from the State of New York
and those states in which the Company is qualified to do business as a foreign
corporation, the resignations of all officers and directors of the Company
effective the close of business on the Closing Date, copies of the Articles of
Incorporation of the Company and any amendments thereto certified by the office
of the Secretary of State of New York, the Bylaws of the Company, and the stock
ledger with all issued or previously issued stock certificates accounted for. In
addition, the Company shall have delivered to the Purchaser a certificate of the
Company's Secretary relating to (i) the Company's Articles of Incorporation,
stating that such articles have not been amended since the date of certification
by the New York Secretary of State, (ii) the Company's Bylaws, stating that such
Bylaws have not been amended from the form presented, (iii) resolutions adopted
by the Company's Board of Directors authorizing and directing the execution and
delivery of this Agreement (and the document related hereto) by the Company, and
(iv) the incumbency and genuiness of the signature of each officer of the
Company executing this Agreement and the Documents related hereto.
(j) Releases. Each officer and director of the Company shall have
--------
executed and delivered to the Purchaser a general release of the Company in the
form of Exhibit 5.2(j) attached.
--------------
(k) Resignations. Each officer and/or director of the Company shall
------------
have executed and delivered to the Purchaser a resignation of his or her
position as an officer and/or director of the Company, in the form of Exhibit
-------
5.2(k) attached.
- ------
(l) Consulting Agreements. At the Closing, each Shareholder shall
---------------------
have entered into a Consulting Agreement with the Company.
(m) Customer Satisfaction Investigation. The Purchaser shall have
-----------------------------------
completed its Customer Satisfaction Investigation and have been satisfied with
the results thereof.
(n) Intellectual Property Agreements. The Purchaser shall have
--------------------------------
received all of the executed Intellectual Property Agreements.
(o) Bank Accounts. The signatories to the Company's bank accounts
-------------
shall have been changed to the Purchaser's reasonable satisfaction.
(p) Employment Agreements. The Employment Agreements executed by each
---------------------
of the Shareholders with the Company shall be terminated and cancelled.
30
<PAGE>
(q) Apartment Lease Termination. The Lease of Single Family Residence
---------------------------
(Including, Apartments, Townhomes, Condominiums and Detached Houses) dated July
1, 1991 (the "Apartment Lease"), by and between Gordon and West, on the one hand
---------------
(as owner), and the Company, on the other hand (as tenant), for the apartment
located at 332 East 84th Street, no. 6-A, New York, New York, shall be
terminated and cancelled.
ARTICLE VI.
INDEMNIFICATION
SECTION 6.1 Survival of Representations, Warranties and Covenants. The
-----------------------------------------------------
representations, warranties and covenants of the parties hereto shall survive
the Closing for a period of two (2) years after the Closing Date; provided,
--------
however, that following the Closing, any breach of any representation, warranty
- -------
or covenant made by the Company or the Shareholders under (a) Sections 2.2
(Capital Stock of the Company) and 2.22 (Brokers) shall survive in perpetuity,
(b) Section 2.14 (Employee Benefit Plans) and 2.16 (Taxes) shall survive for the
respective applicable statutes of limitations with respect to the matters
contained therein, and (c) Section 2.31 (Environmental Compliance) shall survive
for the applicable statutes of limitation for all releases, violations,
liabilities, conditions or occurrences described in Section 2.31 existing or
occurring on or before the Closing Date (such termination dates set forth in
this Section 6.1 being collectively referred to as the "Expiration Dates"). If
----------------
written notice of a claim has been given prior to, but not after, the applicable
Expiration Date, then the relevant representations, warranties and covenants
shall survive as to such claim, until the claim has been finally resolved.
SECTION 6.2 Indemnification by the Shareholders. Except as otherwise
-----------------------------------
limited by this Article VI, each Shareholder, jointly and severally, shall
indemnify, defend and hold harmless the Company, Purchaser, and Purchaser's
shareholders, officers and directors, employees, representatives and agents and
their respective successors and assigns (collectively, the "Purchaser
---------
Indemnified Parties") from and against any and all claims, damages, liabilities,
- -------------------
obligations, losses, costs, expenses (including, without limitation, reasonable
legal costs and expenses) and judgments (at equity or at law) arising out of or
resulting from (a) the breach of any representation, warranty or covenant of the
Company or the Shareholders under this Agreement or any document, agreement or
instrument delivered by the Company or the Shareholders under this Agreement,
(b) products manufactured, shipped or sold by the Company or its agents, or
services provided by the Company, on or before the Closing Date, or (c) any
claim, demand, action or proceeding by a third party relating to provisions of
(a) or (b) of this Section 6.2, whether or not such third party prevails in any
such claim, demand, action or proceeding.
SECTION 6.3 Indemnification by the Purchaser. Except as otherwise limited
--------------------------------
by this Article VI, Purchaser shall indemnify, defend and hold harmless the
Shareholders and their respective heirs and beneficiaries from and against any
and all claims, damages, liabilities, obligations, losses, costs, expenses
(including, without limitation, reasonable legal costs and expenses) and
judgments (at equity or at law) arising out of or resulting from the breach of
any representation, warranty or covenant of the Purchaser under this Agreement
or any document, agreement or instrument delivered by the Purchaser under this
Agreement.
SECTION 6.4 General Indemnification Provisions.
----------------------------------
(a) The indemnified party shall promptly notify the indemnifying
party of any claim, demand, action or proceeding for which indemnification is
sought under Section 6.2 or 6.3 of this Agreement (such notice to state the
nature and basis of the claim, demand, action or proceeding and, if
determinable, a good faith, non-binding estimate of the amount relating thereto)
and, if such claim,
31
<PAGE>
demand, action or proceeding is a claim, demand, action or proceeding by a third
party ("Third Party Claim"), the indemnifying party will have the right, at its
-----------------
own expense, to assume the defense thereof using counsel reasonably acceptable
to the indemnified party, except in the case of a claim that relates to Taxes,
as to which Purchaser shall assume the defense, and the Shareholders may, at
their sole expense, participate in such defense. The indemnified party shall
have the right to participate, at its own expense, with respect to any such
Third Party Claim. After the indemnifying party has notified the indemnified
party of its intention to undertake to defend or settle any such asserted
liability, and for so long as the indemnifying party diligently pursues such
defense, the indemnifying party shall not be liable for any additional legal
expenses incurred by the indemnified party in connection with any defense or
settlement of such asserted liability. In connection with any Third Party Claim,
the parties thereto shall cooperate with each other and provide each other with
access to relevant books and records in their possession. No such Third Party
Claim shall be settled without prior written consent of the indemnified party
which consent may not be unreasonably withheld; provided, however, that if a
-------- -------
firm, written offer is made to settle any such Third Party Claim and the
indemnifying party proposes to accept such settlement and the indemnified party
refuses to consent to such settlement, then: (i) the indemnifying party shall
pay such amount to the indemnified party; (ii) the indemnifying party shall be
excused from, and the indemnified party shall be solely responsible for, all
further defense of such Third Party Claim; and (iii) the maximum liability of
the indemnifying party relating to such Third Party Claim shall be the amount of
the proposed settlement, if the amount thereafter recovered from the indemnified
party on such Third Party Claim is greater than the amount of the proposed
settlement, and, to this end, the indemnified party shall reimburse the
indemnifying party for any additional costs of defense which it subsequently
incurs with respect to such claims and all additional costs of settlement or
judgment.
(b) Any payment pursuant to this Article VI shall be made not later
than thirty (30) days after receipt by the indemnifying party of written notice
from the indemnified party stating that an indemnifiable amount has been paid to
a third party, and specifying the amount thereof and the amount of the indemnity
payment requested.
SECTION 6.5 Limits on Indemnification and Liability.
---------------------------------------
(a) Basket. The Purchaser shall not be entitled to assert any
------
indemnification right under this Agreement unless the aggregate amount of the
Purchaser's indemnified claims and liability exceed $100,000 (the "Basket"), at
------
which time all amounts over the first $25,000 of the Basket shall become payable
to the Purchaser, provided, however, that the Basket limitation shall not apply
-------- -------
with respect to (i) the Purchase Price adjustment, if any, to be made in
accordance with Section 1.2(c)(Net Book Value) or Section 4.15 (Working
Capital), (ii) the payments, if any, to be made by the Shareholders pursuant to
Section 4.14 (Certain Receivables Matters), or (ii) any breaches of
representations, warranties or covenants contained in Sections 2.2 (Capital
Stock of the Company) or 2.22 (Brokers).
(b) Maximum Indemnification Amount. The indemnification obligations
------------------------------
of the Shareholders under this Article VI shall be limited, in the aggregate, to
$8,000,000 (the "Maximum Indemnification Amount"); provided, however, that the
------------------------------ -------- -------
Maximum Indemnification Amount limitation shall not apply with respect to any
breaches of representations, warranties or covenants contained in Sections 2.2
(Capital Stock of the Company), 2.22 (Brokers) or 2.26 (No Undisclosed
Liabilities, but only to the extent that the Company or the Shareholders had
knowledge of such undisclosed liabilities).
(c) Notwithstanding the foregoing subparagraphs (a) and (b), the
indemnification limitations set forth in this Section 6.5 shall not apply to (i)
any Shareholder's indemnification obligations
32
<PAGE>
arising from fraud or intentional misrepresentation by the Company or the
Shareholders or (ii) the matters set forth in Section 4.14 hereof.
SECTION 6.6 Payment of Claims and Adjustments. To provide a fund against
---------------------------------
which the Purchaser may assert claims of indemnification under this Article VI,
and to provide a fund for the Purchase Price adjustments, if any, to be made in
accordance with Sections 1.2(c) and 4.15 hereof, the Deferred Payment has been
withheld from payment to the Shareholders as set forth in Section 1.2(b) hereof
and deposited into escrow at the Closing, pursuant to the Escrow Agreement. All
indemnification by the Shareholders under this Article VI, and all Purchase
Price adjustments, if any, to be made pursuant to Sections 1.2(c) and 4.15
hereof, shall be made first by means of an indemnification claim or an
adjustment claim, as applicable, against the Deferred Payment pursuant to the
Escrow Agreement. To the extent that the Deferred Payment is insufficient to
cover the claim and/or adjustment, the balance of the claim and/or adjustment
will be paid promptly by the Shareholders. The right of payment set forth herein
shall not be exclusive of any other right or remedy Purchaser may have, whether
under this Agreement or any other document delivered hereunder, or at law or in
equity.
SECTION 6.7 No Recourse Against the Company. On and after the Closing
-------------------------------
Date, each Shareholder shall have no claim for indemnification, contribution or
other recourse against the Company (all of which hereby are expressly waived by
the Shareholders) in connection with any claim made by the Purchaser against the
Shareholders, whether pursuant to this Article VI or otherwise.
ARTICLE VII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Closing:
(a) by the mutual written consent of the Shareholders and the
Purchaser; or
(b) by either the Shareholders and the Company, on the one hand, or
Purchaser, on the other, if the Closing shall not have occurred by August 31,
1999; provided, however, that the right to terminate this Agreement under this
-------- -------
Section 7.1(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement shall have been the cause of, or shall have
resulted in the failure of, the Closing to occur on the Closing Date and nothing
contained herein shall relieve such party from liability for breach of this
agreement.
SECTION 7.2 Waiver. At any time prior to the Closing, either the
------
Shareholders or the Purchaser may (a) extend the time for the performance of any
of the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties of the other parties
contained herein or in any document delivered pursuant hereto, or (c) waive
compliance by the other parties with any of the agreements or conditions
contained herein. Any agreement on the part of either the Shareholders or
Purchaser to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by the party or parties to be bound thereby.
ARTICLE VIII.
GENERAL PROVISIONS
SECTION 8.1 Notices. Any notice, demand, claim, or other communication
-------
required or permitted under this Agreement shall be in writing and shall be
effectively given only if mailed by United
33
<PAGE>
States certified or registered mail, postage prepaid, return receipt requested,
or sent by a national commercial courier service, return receipt requested for
next day delivery, to be confirmed in writing by such courier, or by hand
delivery, or confirmed by signed receipt, and shall be deemed to have been
given, delivered and received three business days after the same is deposited at
a regularly maintained post office of the United States Postal Service, twenty-
four (24) hours after the same is deposited with such a courier service, or upon
hand delivery of the same, as applicable, to the parties at the following
addresses (or at such other address as a party may specify by notice to the
others, provided that notice of change of address shall be effective only upon
receipt):
If to the Shareholders: Colleen Gordon
479 El Cielito Road
Santa Barbara, California 93105
Kevin West
479 El Cielito Road
Santa Barbara, California 93105
With a copy to: Thelen, Reid & Priest, LLP
333 West San Carlos Street, 17th Floor
San Jose, California 95110-2701
Attn: Jay L. Margulies, Esq.
If to the Company: Market Place Media
26 Castilian Drive
Santa Barbara, California 93117
Attn: Chief Executive Officer
With a copy to: Thelen, Reid & Priest, LLP
333 West San Carlos Street, 17th Floor
San Jose, California 95110-2701
Attn: Jay L. Margulies, Esq.
If to Purchaser: College Television Network, Inc.
5784 Lake Forrest Drive
Suite 275
Atlanta, Georgia 30378
Attn: Jason Elkin, Chief Executive Officer
With a copy to: Morris, Manning & Martin, L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326-1044
Attn: Neil H. Dickson, Esq.
SECTION 8.2 Headings. The headings contained in this Agreement are for
--------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.3 Severability. If any term or other provision of this Agreement
------------
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of
34
<PAGE>
this Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner so that transactions contemplated hereby are
fulfilled to the greatest extent possible.
SECTION 8.4 Entire Agreement. This Agreement constitutes the entire
----------------
agreement among the parties and supersedes all prior agreements and undertakings
with respect to the subject matter hereof.
SECTION 8.5 Assignment. This Agreement and all rights and obligations
----------
hereunder may not be assigned or transferred without the prior written consent
of the other parties hereto; provided, however, Purchaser shall have the right
-------- -------
to assign any or all of the rights, assets or covenants under this Agreement to
an affiliate of Purchaser. For purposes of this Agreement, the term "affiliate"
shall mean with respect to Purchaser a Person that directly or indirectly,
through one or more intermediaries, controls or is controlled by or is under
common control with Purchaser.
SECTION 8.6 No Third-Party Beneficiaries. This Agreement is for the sole
----------------------------
benefit of the parties hereto and nothing herein expressed or implied shall give
or be construed to give to any person or entity, other than the parties hereto
and such assigns, any legal or equitable rights hereunder.
SECTION 8.7 "Knowledge" Defined. As used in the Agreement, the terms "to
------------------
the knowledge of the Company," "to the Company's knowledge," and words of
similar import with respect to the Company shall include the actual knowledge of
certain executives of the Company set forth hereafter, together with the
knowledge a reasonable business person would have obtained after making
reasonable inquiry and after exercising reasonable diligence with respect to the
matter at hand. The Company's executives shall consist of Colleen Gordon, Kevin
West, Andrew Sawyer and Greg Anthony. As used this Agreement, the terms "to the
knowledge of the Shareholders," "to the Shareholders' knowledge," and words of
similar import with respect to the Shareholders shall include the knowledge of
each such Shareholder, together with the knowledge a reasonable person in such
Shareholder's position would have obtained after making reasonable inquiry and
after exercising reasonable diligence with respect to the matter at hand.
SECTION 8.8 Amendment. This Agreement may not be amended, supplemented or
---------
modified except by an instrument in writing making specific reference to this
Agreement and signed by the parties hereto.
SECTION 8.9 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same instrument.
SECTION 8.10 Binding Agreement. This Agreement shall be binding upon and
-----------------
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and permitted assigns.
35
<PAGE>
SECTION 8.11 Governing Law; Binding Arbitration.
----------------------------------
(a) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED UNDER
AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA, WITHOUT REGARD TO THE
PRINCIPLES THEREOF RELATING TO CONFLICT OF LAWS.
(b) Except as otherwise specifically provided herein, all disputes
arising under this Agreement shall be submitted to and settled by arbitration.
Arbitration shall be by one (1) arbitrator selected in accordance with the rules
of the American Arbitration Association, Los Angeles, California ("AAA"), by the
---
AAA. The hearing before the arbitrator shall be held in Los Angeles, California
and shall be conducted in accordance with the rules existing at the date thereof
of the AAA, to the extent not inconsistent with this Agreement. The decision of
the arbitrator shall be final and binding as to any matters submitted to them
under this Agreement. All costs and expense incurred in connection with any such
arbitration proceeding and those incurred in any civil action to enforce the
same shall be borne by the party against which the decision is rendered.
[SIGNATURES APPEAR ON NEXT PAGE]
36
<PAGE>
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, under seal, as of the date first written above.
"PURCHASER"
COLLEGE TELEVISION NETWORK, INC.
By: /s/ Jason Elkin
-------------------------------
Title: CEO/CHAIRMAN
----------------------------
[CORPORATE SEAL]
"COMPANY"
ARMED FORCES COMMUNICATIONS,
INC. d/b/a MARKET PLACE MEDIA
By: /s/ Colleen Gordon
-------------------------------
Title: CEO
----------------------------
[CORPORATE SEAL]
"SHAREHOLDERS"
/s/ Kevin West /s/ Colleen Gordon (L.S.)
- -------------------------- ----------------------------------
Witness COLLEEN GORDON, Individually
/s/ Colleen Gordon /s/ Kevin West (L.S.)
- -------------------------- ----------------------------------
Witness KEVIN WEST, Individually
37
<PAGE>
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Escrow Agreement") is made as of the 31st day of
----------------
August, 1999, by and among COLLEGE TELEVISION NETWORK, INC., a Delaware
corporation ("Purchaser"), COLLEEN GORDON and KEVIN WEST (collectively, the
---------
"Shareholders"), and SunTrust Bank, Atlanta, a Georgia corporation ("Escrow
------------ ------
Agent").
- -----
W I T N E S E T H:
-----------------
WHEREAS, Purchaser, the Shareholders and Armed Forces Communications, Inc.,
a New York corporation d/b/a Market Place Media ("Company"), have entered into a
-------
Stock Purchase Agreement dated July 16, 1999 (the "Purchase Agreement"),
------------------
pursuant to which the Purchaser is acquiring all of the capital stock in the
Company owned by the Shareholders; and
WHEREAS, this Escrow Agreement is being entered into pursuant to Sections
1.2(b) and 5.1(d) of the Purchase Agreement; and
WHEREAS, the Escrow Agent is willing to act as escrow agent in accordance
with the terms and conditions set forth herein and the Purchaser and the
Shareholders desire the Escrow Agent to so act; and
WHEREAS, insofar as the Escrow Agent is concerned, this Escrow Agreement
shall be the sole document governing the obligations of the Escrow Agent
relating to the Escrow Amount (as defined herein) and interest thereon;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged conclusively, the parties,
intending to be legally bound, agree as follows:
1. Establishment of Escrow Agreement. The Escrow Agent shall establish
---------------------------------
through its Trust Department an interest-bearing, escrow account designated as
the "Market Place Escrow Account" (the "Account") into which shall be deposited
-------
by the Purchaser in immediately available funds upon the closing ("Closing") of
-------
the Purchase Agreement the amount of $2,500,000 (the "Escrow Amount"), and the
-------------
Escrow Agent shall hold such Escrow Amount and interest accrued thereon in
escrow (subject to investment thereof in accordance with Section 2 hereof) and
shall distribute the same pursuant to the terms of this Escrow Agreement.
2. Receipt and Investment of Escrow Amount. Upon receipt of the Escrow
---------------------------------------
Amount, the Escrow Agent shall immediately invest such Escrow Amount in a
separate and distinct U.S. Treasury Securities Money Market Fund deposit account
bearing interest at a rate customary for like accounts offered by the Escrow
Agent.
3. Distribution of Funds.
---------------------
(a) Written Instructions. In the event that the Escrow Agent shall
--------------------
receive written instructions jointly executed by the Purchaser and the
Shareholders directing that the Escrow Amount (or a portion thereof) be
disbursed, the Escrow Agent shall disburse such funds as directed in the
instructions. In the event that the Escrow Agent shall receive written
instructions executed by only the Purchaser directing that the Escrow Amount (or
a portion thereof) be distributed to the Purchaser (which instructions the
Purchaser shall simultaneously deliver to the Shareholders), and the
Shareholders shall
<PAGE>
not, within 20 days of the receipt of such instructions by the Escrow Agent,
have delivered to the Escrow Agent and the Purchaser written notice that the
Shareholders dispute the disbursement to be made pursuant to the Purchaser's
instructions, then the Escrow Agent shall disburse the Escrow Amount (or the
portion thereof set forth in the Purchaser's instructions) to the Purchaser. In
the event the Escrow Agent and the Purchaser receive, within such 20-day period,
written notice from the Shareholders disputing the disbursement of the Escrow
Amount (or any portion thereof) to be made pursuant to the Purchaser's
instructions, then distribution shall be made in accordance with the final
determination of an arbitrator, in accordance with Section 13 hereof, or as the
Purchaser and the Shareholders may jointly instruct the Escrow Agent in writing.
Written instructions relied upon by the Escrow Agent may be in the form of
original copy or telecopy (which, in each case, may be executed in
counterparts).
(b) Instruction by Court. In the event that the Escrow Agent shall be
--------------------
served with a copy of an order of a court of competent jurisdiction instructing
the Escrow Agent as to the disposition of the Escrow Amount (or any portion
thereof), the Escrow Agent shall disburse the funds as provided therein.
(c) No Instructions. To the extent that the Escrow Agent has not
---------------
received instructions for disbursement on or prior to August 31, 2000, the
Escrow Agent shall disburse all of the Escrow Amount or remaining portion
thereof (together with all accrued interest) to the Shareholders.
4. Responsibility of the Escrow Agent. The Escrow Agent hereby accepts
----------------------------------
the escrow created by this Escrow Agreement and agrees to serve in the capacity
of Escrow Agent hereunder in accordance with the terms and conditions hereof.
The Escrow Agent shall not incur liability to any party for damages, losses or
expenses, except for its own gross negligence or willful misconduct and:
(a) The duties and obligations of the Escrow Agent shall be
determined solely by the express provisions of this Escrow Agreement, and no
implied covenants, duties or obligations shall bind or be enforceable against
the Escrow Agent. The Escrow Agent shall not be liable for any action taken,
suffered, or omitted by it in good faith and reasonably believed by it to be
authorized or within the discretion, rights, duties, privileges, or powers
conferred upon it by this Escrow Agreement. The Escrow Agent shall not be liable
for any error of judgment made in good faith by a responsible officer or
officers of the Escrow Agent. The Escrow Agent shall not be liable to any person
with respect to any action taken, omitted or suffered to be taken by it in
accordance with the provisions of this Escrow Agreement or in accordance with
the written directions described in Section 3 hereof.
(b) The Escrow Agent may act in reliance upon any instrument, whether
original or telecopy, or signature believed to be genuine and may assume that
any person purporting to give in writing, notice, advice, or instructions in
connection with the provisions hereof has been duly authorized to do so.
(c) The Escrow Agent may consult with and obtain advice from legal
counsel, auditors, and other experts in connection with this Escrow Agreement or
its duties hereunder, and it shall incur no liability and shall be fully
protected in acting in good faith in accordance with the written opinions and
instructions of such counsel, auditors or other experts rendered within the area
of their respective expertise. Any such fees and expenses of such legal counsel,
auditors or other experts shall be considered part of the fees and expenses
described herein.
(d) The Escrow Agent may exercise any of its powers or
responsibilities hereunder and exercise any rights hereunder either directly or
by or through its agents or attorneys. Nothing in this Escrow Agreement shall be
deemed to impose upon the Escrow Agent any liability to any other person as a
result of any failure of the Escrow Agent to qualify to do business in any
jurisdiction other than the jurisdiction of its formation.
-2-
<PAGE>
(e) The Escrow Agent shall not be responsible for and shall not be
under a duty to examine into or pass upon the validity, binding effect,
execution, or sufficiency of this Escrow Agreement or any agreement mandatory or
supplemental hereto.
(f) No property held in escrow by the Escrow Agent hereunder shall be
subject to any setoff, counterclaim, recoupment, or other right that the Escrow
Agent may have against Purchaser or the Shareholders (except with respect to any
payment or reimbursement to be made to the Escrow Agent hereunder) or against
any other person for any reason whatsoever.
(g) The Escrow Agent makes no representation as to the validity,
value, genuineness, or collectibility of any monies or instrument delivered to
it.
5. Indemnity. The Purchaser and Shareholders hereby, jointly and
---------
severally, agree to indemnify Escrow Agent against, and agree to hold Escrow
Agent harmless from, any and all claims, actions, demands, losses, damages,
expenses (including, without limitation, court costs, attorneys' fees and
expenses, and accountants' fees), and liabilities that may be imposed upon
Escrow Agent in the performance of its duties hereunder as Escrow Agent,
including, without limitation, any litigation arising from this Escrow Agreement
or involving the subject matter hereof, but excluding any such claims, actions,
demands, losses, damages, expenses, and liabilities resulting from or arising
out of any willful misconduct or gross negligence by Escrow Agent hereunder.
6. Qualification. The Escrow Agent shall at all times be a bank or trust
-------------
company in good standing, organized and doing business under the laws of the
United States of America or a State of the United States, and authorized under
the laws of its jurisdiction of incorporation to exercise corporate escrow
powers. If the Escrow Agent shall at any time cease to have the foregoing
qualifications, the Escrow Agent shall promptly provide written notice thereof
to Purchaser and the Shareholders, thereby permitting Purchaser and the
Shareholders to elect to arrange for a successor Escrow Agent.
7. Compensation to Escrow Agent. Escrow Agent's fee for performing its
----------------------------
duties under this Agreement shall be $3,000.00, and, additionally, Escrow Agent
shall be entitled to reimbursement for the reasonable fees and disbursements, if
any, of the Escrow Agent's counsel and all other reasonable expenses,
disbursements and liabilities incurred or made by Escrow Agent hereunder. All
fees and expenses of the Escrow Agent shall be paid by the Shareholders. The
Escrow Agent may deduct its fees and expenses from the disbursements to the
Shareholders and shall simultaneously therewith provide Shareholders with a
statement for such fees and expenses.
8. Termination. This Escrow Agreement shall terminate upon final
-----------
disbursement of the entire Escrow Amount plus accrued interest in accordance
with the terms hereof; provided, however, that the obligation of the
-------- -------
Shareholders to pay the compensation and reimbursement for expenses set forth in
Section 7 above shall survive; provided, further, however, that the provisions
-------- ------- -------
of Section 5 hereof shall survive.
9. Notices. All notices, consents, waivers and other communications under
-------
this Escrow Agreement must be in writing and will be deemed to have been duly
given: (i) upon delivery by hand (with written confirmation of receipt); (ii)
upon transmission by telecopier (with written confirmation of receipt), provided
that a copy is mailed by registered mail, return receipt requested; (iii) five
(5) business days after posting, if transmitted by postage prepaid registered or
certified mail, return receipt requested; or (iv) upon receipt by the addressee,
if sent by a nationally recognized overnight delivery service (receipt
requested), in each case to the appropriate addresses and telecopier numbers set
forth below (or to such other addresses and telecopier numbers as a party may
designate by notice in accordance with this notice section):
-3-
<PAGE>
If to Escrow Agent: SunTrust Bank, Atlanta
Corporate Trust Department
25 Park Place, 24th Floor
Atlanta, Georgia 30303-2900
Attention: Rebecca Fisher
Telephone: (404) 588-7262
Telecopy: (404) 588-7335
If to Purchaser: College Television Network, Inc.
5784 Lake Forrest Drive, Suite 275
Atlanta, Georgia 30378
Attention: Jason Elkin, President
Telephone: (404) 256-4444
Telecopy: (404) 257-9517
Tax ID No. 13-3557317
If to Shareholders: Colleen Gordon
479 El Cielito Road
Santa Barbara, California 93105
Telephone: 805-968-8007
Telecopy: 805-968-8449
Social Security No. ###-##-####
Kevin West
479 El Cielito Road
Santa Barbara, California 93105
Telephone: 805-968-8007
Telecopy: 805-968-8449
Social Security No. ###-##-####
10. Resignation. The Escrow Agent may resign at any time, upon 30 days'
-----------
prior written notice to the Purchaser and the Shareholders and shall deposit all
amounts then held by it with a successor escrow agent to be jointly designated
by the Purchaser and the Shareholders. Any such successor escrow agent must
agree to be and shall be bound by, and shall have all the rights, duties and
responsibilities of the Escrow Agent under this Escrow Agreement. If, upon the
effective date of such resignation, no successor escrow agent shall have been
designated, the Escrow Agent shall have the right to tender into the registry or
custody of any court of competent jurisdiction any part or all of the Escrow
Amount and shall be relieved of any further obligations under this Escrow
Agreement. Such resignation shall not deprive the Escrow Agent of its
compensation earned prior thereto, and the provisions of Section 5 hereof shall
survive any resignation by the Escrow Agent.
11. Successors and Assigns. This Escrow Agreement shall inure to the
----------------------
benefit and be binding upon the parties hereto and their respective successors
and assigns.
12. Severability. In the event that any one or more provisions contained
------------
in this Escrow Agreement shall be deemed or declared invalid, illegal, or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not thereby be affected or impaired
in any way.
13. Governing Law. This Escrow Agreement shall be governed by, and
-------------
construed and enforced in accordance with, the laws of the State of Georgia.
-4-
<PAGE>
14. Binding Arbitration. Except as otherwise specifically provided herein,
-------------------
all disputes arising under this Escrow Agreement shall be submitted to and
settled by arbitration. Arbitration shall be by one (1) arbitrator selected in
accordance with the rules of the American Arbitration Association, Los Angeles,
California ("AAA"), by the AAA. The hearing before the arbitrator shall be held
---
in Los Angeles, California and shall be conducted in accordance with the rules
existing at the date thereof of the AAA, to the extent not inconsistent with
this Escrow Agreement; provided, however, that should the Escrow Agent take any
-------- -------
legal action in connection with this Escrow Agreement or towards its
enforcement, the Escrow Agent may change the rules and location of the AAA set
forth herein to those of the AAA in Atlanta, Georgia. The decision of the
arbitrator shall be final and binding as to any matters submitted to them under
this Escrow Agreement. All costs and expense incurred in connection with any
such arbitration proceeding and those incurred in any civil action to enforce
the same shall be borne by the party against which the decision is rendered.
15. Counterparts. This Escrow Agreement may be executed in multiple
------------
counterparts, each of which when so executed shall be deemed an original, but
all of which together shall constitute one and the same agreement.
16. No Waiver. No course of dealing, nor any delay on the part of the
---------
Escrow Agent or any party to this Escrow Agreement in exercising any rights
hereunder, nor any failure to exercise the same, shall operate as a waiver of
such rights hereof, and may be amended or modified only by a writing signed by
the parties hereto.
17. Headings. The headings of the sections of this Escrow Agreement are
--------
inserted as a matter of convenience and for reference only, and in no way
define, limit, extend or describe the scope of this Escrow Agreement or the
intent of any provision hereof.
18. Amendments. This Escrow Agreement cannot be amended or modified except
----------
by another agreement in writing signed by all the parties hereto or by their
respective successors in interest.
[SIGNATURES ON NEXT PAGE]
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to
be duly executed as of the date and year first above written.
"Purchaser"
COLLEGE TELEVISION NETWORK, INC.
By:________________________________
Name:______________________________
Title:_____________________________
Tax ID No: 13-3557317
"Shareholders"
___________________________________
Colleen Gordon
SSN: ###-##-####
___________________________________
Kevin West
SSN: ###-##-####
"Escrow Agent"
SUNTRUST BANK, ATLANTA
By:________________________________
Name:______________________________
Title:_____________________________
-6-
<PAGE>
PURCHASE AGREEMENT
DATED AS OF
AUGUST 31 1999
BY AND BETWEEN
COLLEGE TELEVISION NETWORK, INC.
AND
U-C HOLDINGS, L.L.C.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I DEFINITIONS......................................................................1
ARTICLE II INITIAL CLOSING.................................................................9
Section 2.1 Authorization of Initial Purchased Securities................................9
---------------------------------------------
Section 2.2 Purchase of Initial Purchased Securities.....................................9
----------------------------------------
Section 2.3 Initial Closing..............................................................9
---------------
ARTICLE III SUBSEQUENT CLOSINGS............................................................9
Section 3.1 Authorization of Additional Purchased Securities.............................9
------------------------------------------------
Section 3.2 Purchase of Additional Purchased Securities..................................9
-------------------------------------------
Section 3.3 Subsequent Closings.........................................................10
-------------------
ARTICLE IV PURCHASER'S REPRESENTATIONS....................................................11
Section 4.1 Investment Intention........................................................11
--------------------
Section 4.2 Accredited Investor.........................................................11
-------------------
Section 4.3 Corporate Existence.........................................................11
-------------------
Section 4.4 Corporate Power: Authorization: Enforceable Obligations.....................11
-------------------------------------------------------
ARTICLE V COMPANY'S REPRESENTATIONS, WARRANTIES AND COVENANTS.............................12
Section 5.1 Capitalization..............................................................12
--------------
Section 5.2 Authorization and Issuance of the Initial Purchased Securities and the
----------------------------------------------------------------------
Additional Purchased Securities.........................................13
-------------------------------
Section 5.3 Securities Laws.............................................................13
---------------
Section 5.4 Corporate Existence: Compliance with Law....................................13
----------------------------------------
Section 5.5 Subsidiaries................................................................14
------------
Section 5.6 Corporate Power: Authorization: Enforceable Obligations.....................14
-------------------------------------------------------
Section 5.7 Financial Statements........................................................14
--------------------
Section 5.8 Ownership of Property.......................................................15
---------------------
Section 5.9 Material Contracts: Indebtedness............................................15
--------------------------------
Section 5.10 Environmental Protection....................................................16
------------------------
Section 5.11 Labor Matters...............................................................17
-------------
Section 5.12 Taxes.......................................................................17
-----
Section 5.13 No Litigation...............................................................18
-------------
Section 5.14 Brokers.....................................................................18
-------
Section 5.15 Management and Labor Agreements.............................................18
-------------------------------
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 5.16 Patents, Trademarks, Copyrights and Licenses................................18
--------------------------------------------
Section 5.17 No Material Adverse Effect..................................................19
--------------------------
Section 5.18 ERISA.......................................................................19
-----
Section 5.19 Registration Rights.........................................................21
-------------------
Section 5.20 Required Filings............................................................21
----------------
Section 5.21 Full Disclosure.............................................................21
---------------
Section 5.22 Schedule 14C:...............................................................21
-------------
Section 5.23 Schedule 14C: Reclassification..............................................21
------------------------------
Section 5.24 Credit Agreement............................................................22
----------------
Section 5.25 Use of Proceeds.............................................................22
---------------
ARTICLE VI CONDITIONS PRECEDENT TO INITIAL CLOSING........................................22
Section 6.1 Conditions Precedent........................................................22
--------------------
ARTICLE VII CONDITIONS PRECEDENT TO SUBSEQUENT CLOSING....................................24
Section 7.1 Conditions Precedent........................................................24
--------------------
ARTICLE VIII SECURITIES LAW MATTERS.......................................................27
Section 8.1 Legends.....................................................................27
-------
Section 8.2 Transfer of Restricted Securities...........................................27
---------------------------------
ARTICLE IX EXPENSES.......................................................................28
ARTICLE X LIMITATION ON CLAIMS OF THE PURCHASER...........................................28
Section 10.1 Limitation..................................................................28
----------
ARTICLE XI MISCELLANEOUS..................................................................29
Section 11.1 Notices.....................................................................29
-------
Section 11.2 Binding Effect: Benefits....................................................30
------------------------
Section 11.3 Amendment...................................................................30
---------
Section 11.4 Successors and Assigns: Assignability.......................................30
-------------------------------------
Section 11.5 Remedies....................................................................31
--------
Section 11.6 Section and Other Headings..................................................31
--------------------------
Section 11.7 Severability................................................................31
------------
Section 11.8 Entire Agreement............................................................31
----------------
Section 11.9 Counterparts................................................................31
------------
Section 11.10 Publicity...................................................................31
---------
Section 11.11 Governing Law...............................................................31
-------------
Section 11.12 No Strict Construction......................................................31
----------------------
</TABLE>
-ii-
<PAGE>
SCHEDULES AND EXHIBITS
----------------------
Schedule 5.1 Stock, Preferred Stock, Options and Warrants
Schedule 5.4 Foreign Qualification
Schedule 5.5 Subsidiaries
Schedule 5.7 Financial Statements; Other Obligations
Schedule 5.8 Ownership of Property
Schedule 5.9 Material Contracts
Schedule 5.11 Labor Matters
Schedule 5.13 Litigation
Schedule 5.15 Management and Labor Agreements
Schedule 5.19 Registration Rights Schedule
Exhibit A Second Certificate of Designation
Exhibit B Opinion of Company Counsel
Exhibit C Capitalization Chart
-iii-
<PAGE>
PURCHASE AGREEMENT
------------------
THIS PURCHASE AGREEMENT, dated as of August 31, 1999, by and
between College Television Network, Inc., a Delaware corporation having an
office at 5784 Lake Forrest Drive, Suite 275, Atlanta, GA 30328 (the "Company"),
-------
and U-C Holdings, L.L.C., a Delaware limited liability company (the
"Purchaser").
---------
On the terms and subject to the conditions set forth herein,
the Company has agreed to issue and sell to the Purchaser, and the Purchaser has
agreed to purchase from the Company, 1,000,000 shares of the Company's series A
convertible preferred stock, $.001 par value per share ("Series A Convertible
--------------------
Preferred") for an aggregate purchase price of $15,000,000.
- ---------
On the terms and subject to the conditions set forth herein,
upon the written notice from the Company pursuant to Section 3.3, Purchaser
-----------
agrees to purchase, and the Company agrees to issue and sell to the Purchaser,
from time to time after the date of this Agreement, additional shares of Series
A Convertible Preferred for an aggregate purchase price of up to $10,000,000
less the Guaranty Amount, as defined below.
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, it is agreed as follows:
ARTICLE I
DEFINITIONS
"Additional Purchased Securities" shall mean shares of Series
-------------------------------
A Convertible Preferred purchased by the Purchaser at each Subsequent Closing
from time to time pursuant to Section 3.2 and Section 3.3.
----------- ------------
"Affiliated Group" shall mean an affiliated group as defined
----------------
in Section 1504 of the IRC (or any analogous combined, consolidated or unitary
group defined under state, local or foreign income tax law) of which Company is
or has been a member.
"Annual Report" shall mean the annual report of the Company on
-------------
Form 10-KSB for the fiscal year ended December 31, 1998, which has been filed
with the SEC.
"Board" shall mean the board of directors of the Company.
-----
"Business Day" shall mean any day that is not a Saturday, a
------------
Sunday or a day on which banks are required or permitted to be closed in the
State of Illinois or the State of Georgia.
"Capitalization Chart" shall have the meaning set forth in
--------------------
Section 5.1.
- -----------
<PAGE>
"Certificate of Incorporation" shall mean the Restated
----------------------------
Certificate of Incorporation of the Company filed on November 10, 1997 with the
Secretary of State of the State of Delaware, and amended by the Articles of
Amendment to the Restated Certificate of Incorporation, filed on May 29, 1998
with the Secretary of State of the State of Delaware, and as modified by the
Original Certificate of Designation, filed on July 22, 1999, and by the Second
Certificate of Designation, filed on or about the date hereof, and as the same
may be further amended from time to time.
"Charges" shall mean (A) all federal, state, county, city,
-------
municipal, local, foreign or other governmental (including, without limitation,
PBGC taxes at the time due and payable, levies, assessments, charges, liens,
claims or encumbrances upon or relating to (i) the Company's employees, payroll,
income or gross receipts, (ii) the Company's ownership or use of any of its
assets, or (iii) any other aspect of the Company's business, or (B) any
liability of the Company for the payment of any amounts of the type described in
clause (A) arising as a result of being (or ceasing to be) a member of any
Affiliated Group (or being included (or required to be included) in any tax
return relating thereto).
"Class C Warrant" shall mean the Company's Class C Warrants
---------------
listed on the Capitalization Chart attached hereto as Exhibit C.
----------
"Closing" shall mean each of the Initial Closing and each
-------
Subsequent Closing, and "Closing Date" shall mean each of the Initial Closing
------------
Date and each Subsequent Closing Date.
"COBRA" shall have the meaning set forth in Section 5.19(l)
----- ---------------
"Common Stock" shall mean the common stock of the Company with
------------
par value $.005 per share.
"Controlled Group" shall mean all members of a controlled
----------------
group of corporations and all members of a controlled group of trades or
businesses (whether or not incorporated) under common control which, together
with the Company, are treated as a single employer under Section 414 of the Code
or Section 4001 of ERISA.
"Convertible Preferred" shall mean the convertible preferred
---------------------
stock, par value $.001 per share, of the Company having the rights and
preferences set forth in the Original Certificate of Designation.
"Environmental Laws" shall mean all federal, state and local
------------------
laws, statutes, ordinances and regulations, now or hereafter in effect, and in
each case as amended or supplemented from time to time, and any judicial or
administrative interpretation thereof, including, without limitation, any
applicable judicial or administrative order, consent decree or judgment,
relative to the applicable Real Estate, relating to the regulation and
protection of human health, safety, the environment and natural resources
(including, without limitation, ambient air, surface water, groundwater,
wetlands, land surface or subsurface strata, wildlife, aquatic species and
vegetation).
-2-
<PAGE>
Environmental Laws include but are not limited to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. ss. 9601 et seq.) ("CERCLA"); the Hazardous Material Transportation Act,
------
as amended (49 U.S.C. ss. 1801 et seq.); the Federal Insecticide, Fungicide, and
Rodenticide Act, as amended (7 U.S.C. ss. 136 et seq. ); the Resource
Conservation and Recovery Act, as amended (42 U.S.C. ss. 6901 et seq.) ("RCRA");
----
the Toxic Substance Control Act, as amended (15 U. S.C. ss. 2601 et seq.); the
Clean Air Act, as amended (42 U. S.C. ss. 740 et seq.); the Federal Water
Pollution Control Act, as amended (33 U.S.C. ss. 1251 et seq.); the Occupational
Safety and Health Act, as amended (29 U.S.C. ss. 651 et sec.) ("OSHA"); and the
----
Safe Drinking Water Act, as amended (42 U.S.C. ss. 300f et seq.), and any and
all regulations promulgated thereunder, and all analogous state and local
counterparts or equivalents and any transfer of ownership notification or
approval statutes.
"Environmental Liabilities and Costs" shall mean all
-----------------------------------
liabilities, obligations, responsibilities, remedial actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including, without limitation, all fees, disbursements and expenses of counsel,
experts and consultants and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any claim,
suit, action or demand by any Person, whether based in contract, tort, implied
or express warranty, strict liability, criminal or civil statute or common law
(including, without limitation, any thereof arising under any Environmental Law,
permit, order or agreement with any Governmental Authority) and which relate to
any health or safety condition regulated under any Environmental Law or in
connection with any other environmental matter or Spill or the presence of a
hazardous substance or threatened Spill of any Hazardous Substance.
"ERISA" shall mean the Employee Retirement Income Security Act
-----
of 1974 (or any successor legislation thereto), as amended from time to time and
any regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to the Company, any
---------------
trade or business (whether or not incorporated) under common control with the
Company and which, together with the Company, are treated as a single employer
within the meaning of Section 414(b), (c), (m) or (o) of the IRC, excluding the
Purchaser and each other Person which would not be an ERISA Affiliate if the
Purchaser did not own any issued and outstanding shares of Stock of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
------------
as amended, and all rules and regulations promulgated thereunder.
"Financials" shall mean the financial statements referred to
----------
in Section 5.7 hereof.
-----------
"Fiscal Year" shall mean the twelve month period ending
-----------
December 31. Subsequent changes of the fiscal year of the Company shall not
change the term "Fiscal Year," unless the Purchaser shall consent in writing to
such change.
-3-
<PAGE>
"GAAP" shall mean generally accepted accounting principles in
----
the United States of America as in effect from time to time.
"Governmental Authority" shall mean any nation or government,
----------------------
any state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guaranty Amount" shall mean at any given time the sum of (i)
---------------
the maximum amount which could be payable at such time by the Purchaser pursuant
to the Guaranty, plus (ii) the aggregate amount of payments actually made by the
Purchaser from time to time pursuant to the Guaranty plus (iii) the maximum
amount which could be payable at such time and by Willis Stein & Partners II,
L.P., a Delaware limited partnership (the "Fund"), and by Willis Stein &
----
Partners Dutch, L.P., a Delaware limited partnership ("Dutch" and together with
-----
the Fund, the "Funds"), pursuant to the guaranty dated as of August 31, 1999, by
-----
each of the Fund and Dutch in favor of Canadian Imperial Bank of Commerce
("CIBC") and/or its affiliates or co-lenders (the "Fund Guaranty"), plus
---- -------------
(without duplication for subparagraph (i) above) (iv) the aggregate amount of
any payments actually made by each of the Fund and Dutch from time to time
pursuant to the Fund Guaranty.
"Guaranteed Indebtedness" shall mean, as to any Person, any
-----------------------
obligation of such Person guaranteeing any Indebtedness, lease, dividend, or
other obligation ("primary obligations") of any other Person (the "primary
------------------- -------
obligor") in any manner including, without limitation, any obligation or
- -------
arrangement of such Person (a) to purchase or repurchase any such primary
obligation, (b) to advance or supply funds (i) for the purchase or payment of
any such primary obligation or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor, (c) 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 (d) to indemnify the owner of such
primary obligation against loss in respect thereof.
"Guaranty" means that certain Guaranty, dated as of August 31,
--------
1999, by the Purchaser in favor of CIBC and/or its affiliates or co-lenders.
"Hazardous Substances" shall have the meaning set forth in
--------------------
Section 5.10(a) hereof.
- --------------
"Indebtedness" of any Person shall mean (i) all indebtedness
------------
of such Person for borrowed money or for the deferred purchase price of property
or services (including, without limitation, reimbursement and all other
obligations with respect to surety bonds, letters of credit and bankers
acceptances, whether or not matured, but not including obligations to trade
creditors incurred in the ordinary course of business), (ii) all obligations
evidenced by notes, bonds, debentures or similar instruments, (iii) all
indebtedness created or arising under any conditional sale or other title
retention agreements 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
-4-
<PAGE>
limited to repossession or sale of such property), (iv) all capital lease
obligations required to be capitalized in accordance with GAAP, (v) all
Guaranteed Indebtedness, (vi) all Indebtedness referred to in clause (i), (ii),
(iii), (iv) or (v) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such Indebtedness and (vii) all liabilities
under Title IV of ERISA.
"Initial Closing" shall have the meaning set forth in Section
--------------- -------
2.3 hereof and "Initial Closing Date" shall have the meaning set forth in
- --- --------------------
Section 2.3 hereof.
- -----------
"Initial Purchased Securities" shall mean the Series A
----------------------------
Convertible Preferred purchased by the Purchaser at the Initial Closing pursuant
to Section 2.2 of this Agreement.
-----------
"IRC" shall mean the Internal Revenue Code of 1986, as
---
amended, and any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any
---
successor thereto.
"Lien" shall mean any mortgage or deed of trust, pledge,
----
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority, or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including without limitation, any title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest as to assets owned by the relevant Person under the Uniform
Commercial Code or comparable law of any jurisdiction).
"Material Adverse Effect" shall mean material adverse effect
-----------------------
on the business, assets, operations, prospects or financial or other condition
of the Company.
"Material Contracts" shall mean (i) all of the Company's
------------------
contracts, agreements, leases or other instruments to which the Company is a
party or by which the Company or its properties are bound, which in the
Company's good faith judgment are required to be disclosed as exhibits to the
Company's annual report on Form 10-KSB, (ii) all of the Company's loan
agreements, bank lines of credit agreements, indentures, mortgages, deeds of
trust, pledge and security agreements, factoring agreements, conditional sales
contracts, letters of credit or other debt instruments, (iii) all material
operating or capital leases for equipment to which the Company is a party, (iv)
all non-competition and similar agreements other than as contained in employment
agreements to which the Company is a party, (v) all contracts for the employment
of any officer or employee, (vi) all consulting agreements, (vii) any guarantees
by the Company, (viii) all distributor and sales agency agreements, (ix) all
other material contracts not made in the ordinary course of business, and (x)
all material contracts relating to the operation of the Company or, the
production of or programming for the Company or related to the technology
utilized by the Company.
-5-
<PAGE>
"MPM" shall mean Armed Forces Communications, Inc., a New York
---
corporation doing business as Market Place Media.
"Multiemployer Plan" shall mean a "multiemployer plan" as
------------------
defined in Section 4001 (a)(3) of ERISA, and to which Company or any ERISA
Affiliate is making, is obligated to make, has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of them.
"Options" shall mean the options listed on the Capitalization
-------
Chart attached hereto as Exhibit C.
---------
"Original Certificate of Designation" shall mean the
-----------------------------------
Certificate of Designation filed with the Secretary of State of the State of
Delaware on July 22, 1999 which contains the terms and preferences of the
Company's Convertible Preferred.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
----
any successor thereto.
"Pension Plan" shall mean all "employee benefit plans", as
------------
defined in Section 3(3) of ERISA, and any other employee benefit arrangements or
payroll practices, including, without limitation, severance pay, sick leave,
vacation pay, salary continuation for disability, consulting or other
compensation agreements, retirement, deferred compensation, bonus, stock
purchase, hospitalization, medical insurance, life insurance and scholarship
programs (the "Plans") maintained by the Company or to which the Company
-----
contributed, contributes or is obligated to contribute thereunder, and (ii) all
"employee pension plans", as defined in Section 3(2) of ERISA, maintained by the
Company or any of its ERISA Affiliates to which the Company or any of its ERISA
Affiliates contributed, contributes or is obligated to contribute thereunder.
"Permitted Indebtedness" shall mean, with respect to the
----------------------
Company, (i) taxes or assessments or other governmental charges or levies,
either not yet due and payable or to the extent that nonpayment thereof is
permitted by the terms of this Agreement; (ii) obligations under workmen's
compensation, unemployment insurance, social security or public liability laws
or similar legislation; (iii) bids, tenders, contracts (other than contracts for
the payment of money) or leases to which the Company is a party as lessee made
in the ordinary course of business, (iv) public or statutory obligations of the
Company; (v) all deferred taxes and (vi) all unfunded pension fund and other
employee benefit plan obligations and liabilities but only to the extent
permitted to remain unfunded under applicable law.
"Person" shall mean any individual, sole proprietorship,
------
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
-6-
<PAGE>
"Private Placement Warrants" shall mean the Company's private
--------------------------
placement warrants listed on the Capitalization Chart attached hereto as Exhibit
C. -------
- -
"Registration Rights Agreement" shall mean the Registration
-----------------------------
Rights Agreement between Company and the Purchaser, dated as of April 25, 1997,
as such agreement may be amended, supplemented or otherwise modified from time
to time in accordance with the terms thereof.
"Restricted Securities" shall mean (i) the Initial Purchased
---------------------
Securities and the Additional Purchased Securities issued hereunder, and (ii)
any securities issued and exchanged with respect to the securities referred to
in clause (i) by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, reclassification, merger, consolidation
or other reorganization. As to any particular Restricted Securities, such
securities shall cease to be Restricted Securities when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) been distributed to the
public through a broker, dealer or market maker pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act or become eligible for
sale pursuant to Rule 144(k) (or any similar provision then in force) under the
Securities Act or (c) been otherwise transferred and new certificates for them
not bearing the Securities Act legend set forth in Section 8.1 have been
-----------
delivered by Company in accordance with Section 8.2. Whenever any particular
-----------
securities cease to be Restricted Securities, the holder thereof shall be
entitled to receive from Company, without expense, new securities of like tenor
nor bearing a Securities Act legend of the character set forth in Section 8.1.
-----------
"SEC" shall mean the U.S. Securities and Exchange Commission,
---
or any successor thereto.
"Second Certificate of Designation" means the Second
---------------------------------
Certificate of Designation of the Company containing the terms of the Company's
Series A Convertible Preferred, having the rights and preferences set forth on
Exhibit A attached hereto.
- ---------
"Securities Act" shall mean the Securities Act of 1933, as
--------------
amended, and all rules and regulations promulgated thereunder.
"Series A Convertible Preferred" shall mean the Series A
------------------------------
Convertible Preferred stock of the Company defined in the recitals and having
the rights and preferences set forth in the Second Certificate of Designation.
"Shareholder Approval" shall have the meaning as such term is
--------------------
defined in the Second Certificate of Designation.
"Spill" shall have the meaning set forth in Section 5.10.
----- ------------
-7-
<PAGE>
"Stock" shall mean all shares, options, warrants, general or
-----
limited partnership interests, limited liability company membership interest,
participations or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity whether
voting or nonvoting, including, without limitation, common stock, preferred
stock, or any other equity security (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the SEC under the Exchange
Act).
"Subsequent Closing" shall have the meaning set forth in
------------------
Section 3.3 hereof and "Subsequent Closing Date" shall have the meaning set
- ----------- -----------------------
forth in Section 3.3 hereof.
-----------
"Subsidiary" shall mean, with respect to any Person, (a) any
----------
corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,
owned legally or beneficially by such Person and/or one or more Subsidiaries of
such Person, and (b) any partnership or other entity in which such Person and/or
one or more Subsidiaries of such Person shall have an interest (whether in the
form of voting or participation in profits or capital contribution) of more than
50%.
"Transaction Documents" shall mean this Agreement, the
---------------------
Registration Rights Agreement, the Second Certificate of Designation, the
Guaranty, the Fund Guaranty, the CIBC Credit Agreement (defined in Section 5.24)
------------
and all certificates and other documents related to the transactions
contemplated hereby and thereby.
"Warrants" shall mean the Company's Private Placement Warrants
--------
and Class C Warrants.
References to this "Agreement" shall mean this Purchase and
---------
Recapitalization Agreement, including all amendments, modifications and
supplements and any exhibits or schedule to any of the foregoing, and shall
refer to the Agreement as the same may be in effect at the time such reference
becomes operative.
Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given such term
in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are explicitly modified
by the phrase "in accordance with GAAP" shall in no way be construed to limit
the foregoing. The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement, as a whole, including the exhibits and
schedules hereto, as the same may from time to time be amended, modified or
supplemented, and not to any particular section, subsection or clause contained
in this Agreement. Wherever from the context it appears appropriate, each term
-8-
<PAGE>
stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, the feminine and the neuter.
ARTICLE II
INITIAL CLOSING
Section 2.1 Authorization of Initial Purchased Securities. At
---------------------------------------------
or prior to the Initial Closing, the Company shall have duly authorized the
issuance and sale of the Initial Purchased Securities.
Section 2.2 Purchase of Initial Purchased Securities. Subject
----------------------------------------
to the terms and conditions set forth in this Agreement, on the Initial Closing
Date (as defined below), the Purchaser will purchase from the Company, and the
Company will sell to the Purchaser, an aggregate of 1,000,000 shares of Series A
Convertible Preferred for a purchase price of $15 per share (the "Per Share
---------
Price") for an aggregate purchase price of $15,000,000 (the "Initial Purchase
- ----- ----------------
Price"). The Initial Purchase Price will be payable in full by the Purchaser on
- -----
the Initial Closing Date in cash by wire transfer of immediately available funds
to an account designated by the Company.
Section 2.3 Initial Closing. The closing of the purchase and
---------------
sale of the Initial Purchased Securities (the "Initial Closing") shall take
---------------
place simultaneously with the execution of this Agreement (the "Initial Closing
---------------
Date") at the New York office of Kirkland & Ellis located at 153 East 53rd
- ----
Street, New York, New York, or such other place as shall be mutually agreed to
by the parties hereto. On the Initial Closing Date, the Company will deliver to
the Purchaser a certificate representing the shares of Series A Convertible
Preferred representing the Initial Purchased Securities to be purchased by the
Purchaser registered in the name of the Purchaser against delivery by the
Purchaser of the Initial Purchase Price by payment of cash by wire transfer of
immediately available funds to the Company in accordance with Section 2.2
-----------
hereof.
ARTICLE III
SUBSEQUENT CLOSINGS
Section 3.1 Authorization of Additional Purchased Securities.
------------------------------------------------
At or prior to the first Subsequent Closing, the Company shall duly authorize
the issuance and sale of the Additional Purchased Securities to be purchased at
such Subsequent Closing.
Section 3.2 Purchase of Additional Purchased Securities.
-------------------------------------------
Subject to the terms and conditions set forth in this Agreement, from time to
time after the Initial Closing and until:
(a) the first anniversary of the Initial Closing, with
respect to the purchase of Additional Purchased Securities upon the Company's
written notice in accordance with Section 3.3(a) below, the Purchaser may
-----------
purchase from the Company at any Subsequent Closing Additional Purchased
Securities, up to a cumulative total amount (assuming a Guaranty Amount
-9-
<PAGE>
equal to zero/1/) of 666,667 shares of Series A Convertible Preferred, at price
per share equal to the Per Share Price for an aggregate purchase price of up to
$10,000,000 less the Guaranty Amount; and
(b) so long as both the Guaranty and the Fund Guaranty
remain outstanding, or the Purchaser and the Funds have any outstanding
obligations thereunder, the Purchaser shall have the right to purchase from the
Company at any Subsequent Closing, in accordance with Section 3.3(b) below,
-------------
Additional Purchased Securities up to an aggregate number of shares equal to the
quotient obtained by dividing the initial Guaranty Amount by the Per Share
Price, at a price per share equal to the Per Share Price for an aggregate
purchase price of up to the initial Guaranty Amount.
With respect to either Section 3.2(a) and Section 3.2(b) above, the aggregate
-------------- --------------
purchase price for the Additional Purchased Securities purchased at any
Subsequent Closing shall be equal to the Per Share Price multiplied by the
number of shares of Series A Convertible Preferred purchased at such Subsequent
Closing.
Section 3.3 Subsequent Closings. Subject to the terms and
-------------------
conditions herein (including the satisfaction of the conditions set forth in
Article VII), upon either (a) the Company's written notice specifying (i) the
- -----------
proposed Subsequent Closing Date (which shall not be less than 20 nor more than
60 Business Days after delivery of such notice), (ii) the amount of Additional
Purchased Securities to be purchased and (iii) such other information as may be
requested by the Purchaser or (b) a payment by the Purchaser with respect to the
Guaranty, or a payment by either the Fund or Dutch with respect to the Fund
Guaranty, in each case whether as a result of a call by CIBC or a voluntary
investment which has the effect of reducing the amount outstanding under the
Guaranty, which the Purchaser and the Funds may elect to make such payment by
the purchase of a number of Additional Purchased Securities equal to the
quotient obtained by dividing the amount of such payment by the Per Share Price
for an aggregate purchase price equal to the amount of such payment then the
closing of each such purchase and sale of the Additional Purchased Securities
(each, a "Subsequent Closing") shall take place on such proposed Subsequent
------------------
Closing Date, or other date mutually agreed to by the parties hereto (the
"Subsequent Closing Date"), at the offices of Kirkland & Ellis at 200 East
-----------------------
Randolph Street, Chicago, Illinois or at 153 East 53rd Street, New York, New
York, or such other place as shall be mutually agreed to by the parties hereto.
On each Subsequent Closing Date, the Company will deliver to the Purchaser a
certificate representing the number of shares of Series A Convertible Preferred
purchased at such Subsequent Closing purchased at such Subsequent Closing which
together represent the Additional Purchased Securities purchased by the
Purchaser at such Subsequent Closing to be registered in the name of the
Purchaser against delivery by the Purchaser of the purchase price therefor by
payment of cash to the Company in accordance with Section 3.2.
------------
- --------------------------
/1/ As of the date hereof, the Guaranty Amount is equal to $6,000,000 and the
Purchaser may purchase up to an additional amount of 266.667 ($10 million less
$6 million divided by $15) shares of Series A Convertible Preferred.
-10-
<PAGE>
ARTICLE IV
PURCHASER'S REPRESENTATIONS
As of the Initial Closing and as of each Subsequent Closing,
the Purchaser makes the following representations and warranties to the Company,
each and all of which shall survive the execution and delivery of this Agreement
and each Closing hereunder:
Section 4.1 Investment Intention. The Purchaser is purchasing
--------------------
the Initial Purchased Securities and the Additional Purchased Securities for its
own account, for investment purposes and not with a view to the distribution
thereof. The Purchaser will not, directly or indirectly, offer, transfer, sell,
assign, pledge, hypothecate or otherwise dispose of any of the Initial Purchased
Securities or the Additional Purchased Securities (or solicit any offers to buy,
purchase, or otherwise acquire any of the Initial Purchased Securities or the
Additional Purchased Securities ), except in compliance with the Securities Act.
Section 4.2 Accredited Investor. The Purchaser is an
-------------------
"accredited investor" (as that term is defined in Rule 501 of Regulation D under
the Securities Act) and by reason of its business and financial experience, it
has such knowledge, sophistication and experience in business and financial
matters as to be capable of evaluating the merits and risks of the prospective
investment, is able to bear the economic risk of such investment and it is able
to afford a complete loss of such investment.
Section 4.3 Corporate Existence. The Purchaser is a limited
-------------------
liability company duly organized, validly existing and in good standing under
the laws of its jurisdiction of formation.
Section 4.4 Corporate Power: Authorization: Enforceable
-------------------------------------------
Obligations. The execution, delivery and performance by the Purchaser of the
- -----------
Transaction Documents to be executed by it: (i) are within Purchaser's power, as
applicable; (ii) have been duly authorized by all necessary action, as
applicable; (iii) are not in contravention of any provision of the Purchaser's
governing documents, as applicable; and (iv) will not violate any law or
regulation, or any order or decree of any court or governmental instrumentality
binding on the Purchaser. The Purchaser has full power and authority to perform
its obligations under the Transaction Documents. The Transaction Documents to
which the Purchaser is a party have each been duly executed and delivered by
Purchaser and constitute the legal, valid and binding obligations of the
Purchaser, enforceable against it in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
-11-
<PAGE>
ARTICLE V
COMPANY'S REPRESENTATIONS, WARRANTIES AND COVENANTS
As of the Initial Closing and as of each Subsequent Closing,
the Company makes the following representations, warranties and covenants to the
Purchaser, each and all of which shall survive the execution and delivery of
this Agreement and each Closing hereunder:
Section 5.1 Capitalization.
--------------
(a) The "Capitalization Chart" attached hereto as
--------------------
Exhibit C sets forth a true and complete description of all authorized, issued
- ---------
and outstanding shares of Common Stock, Convertible Preferred and Series A
Convertible Preferred of the Company by including a description of (i) the
number of shares of each class of Stock of the Company issued and outstanding
and (ii) the number and class of all outstanding warrants, options and other
securities convertible into, or exchangeable for, shares of Common Stock or
other securities of the Company. After giving effect to the purchase of the
Initial Purchased Securities, 1,155,426 shares of Common Stock are reserved for
issuance upon exercise of the Private Placement Warrants, 924,832 shares of
Common Stock are reserved for issuance upon exercise of the Class C Warrants,
4,366,660 shares of Common Stock are reserved for issuance upon conversion of
the Series A Convertible Preferred outstanding as of the date hereof (including
the Series A Convertible Preferred purchased at the Initial Closing), and
2,915,933 shares of Common Stock are reserved for issuance upon exercise of the
Options.
(b) All issued and outstanding Stock of the Company
listed on the Capitalization Chart is duly authorized, validly issued, fully
paid and non-assessable. Schedule 5.1 hereto or the Annual Report contains a
------------
complete and correct list of all stockholders of the Company owning, to the
knowledge of the Company, more than 5% of the outstanding Stock of the Company
and the number of shares or warrants owned by each. Except as set forth on
Schedule 5.1 or the Annual Report and except as to the outstanding Series A
- ------------
Convertible Preferred, Options and Warrants, (i) there is no existing option,
warrant, call, commitment or other agreement to which the Company is a party
requiring, and there are no convertible securities of the Company outstanding
which upon conversion would require, the issuance of any additional shares of
Stock of the Company or other securities convertible into shares of equity
securities of the Company, (ii) there are no agreements or obligations
(contingent or otherwise) requiring the Company to repurchase or otherwise
acquire or retire any shares of its capital stock or any warrants, options or
other rights to acquire its capital stock, and (iii) there are no agreements to
which the Company is a party or, to the knowledge of the Company, to which any
stockholder or warrant holder of the Company is a party, with respect to the
voting or transfer of the Stock of the Company. Except as set forth on Schedule
--------
5.1 or the Annual Report, there are no stockholders' preemptive rights or rights
- ---
of first refusal or other similar rights with respect to the issuance of the
Initial Purchased Securities or the Additional Purchased Securities by the
Company. True and correct copies of the Certificate of Incorporation and by-laws
of the Company have been delivered to the Purchaser.
-12-
<PAGE>
Section 5.2 Authorization and Issuance of the Initial
-----------------------------------------
Purchased Securities, and the Additional Purchased Securities. The issuance of
- -------------------------------------------------------------
the to the Initial Purchased Securities, and the Additional Purchased Securities
purchased pursuant to the Guaranty or the Fund Guaranty, has been duly
authorized by all necessary corporate action on the part of the Company and,
upon delivery to the Purchaser of certificates therefor against payment in
accordance with the terms hereof, the Initial Purchased Securities and the
Additional Purchased Securities will have been validly issued and fully paid and
nonassessable, free and clear of all pledges, liens, encumbrances and preemptive
rights, subject to reclassification of the Convertible Preferred into the Series
A Convertible Preferred in accordance with Section 6.1(d). The issuance of
-------------
shares upon the conversion of the Series A Convertible Preferred has been duly
authorized by all necessary corporate action on the part of the Company and,
when issued upon conversion of the Series A Convertible Preferred, such Common
Stock will have been validly issued and fully paid and non-assessable.
Section 5.3 Securities Laws. In reliance on the
---------------
representations of the Purchaser contained in Section 4.1 and 4.2, the offer,
----------- ---
issuance, sale and delivery of the Initial Purchased Securities and the
Additional Purchased Securities, as provided in this Agreement, are exempt from
the registration requirements of the Securities Act and all applicable state
securities laws, and are otherwise in compliance with such laws. Neither the
Company nor any Person acting on its behalf has taken or will take any action
(including, without limitation, any offering of any securities of the Company
under circumstances which would require the integration of such offering with
the offering of the Initial Purchased Securities or the Additional Purchased
Securities under the Securities Act and the rules and regulations of the SEC
thereunder) which might subject the offering, issuance or sale of the Initial
Purchased Securities or the Additional Purchased Securities to the registration
requirements of Section 5 of the Securities Act. No information contained in the
documents filed with the SEC contains any untrue statement of a material fact,
or omits to state a material fact necessary to make the statements contained
therein not misleading in light of the circumstances under which made.
Section 5.4 Corporate Existence: Compliance with Law. The
----------------------------------------
Company (i) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware; (ii) except as indicated on
Schedule 5.4, is duly qualified as a foreign corporation and in good standing
- ------------
under the laws of Massachusetts, New York, Illinois, California, Arizona and
Georgia and each jurisdiction where its ownership or lease of property or the
conduct of its business requires such qualification (except for jurisdictions in
which such failure to so qualify or to be in good standing would not have a
Material Adverse Effect); (iii) has the requisite corporate power and authority
and the legal right to own, pledge, mortgage or otherwise encumber and operate
its properties, to lease the property it operates under lease, and to conduct
its business as now being conducted in all material respects; (iv) has, or has
applied for, all material licenses, permits, consents or approvals from or by,
and has made all material filings with, and has given all material notices to,
all Governmental Authorities having jurisdiction, to the extent required for
such ownership, operation and conduct; (v) is in compliance with its Certificate
of Incorporation and by-laws in all material respects; and (vi) is in compliance
with all applicable provisions of applicable laws, including, but not limited
to, the Securities Act and the Exchange Act, except for such non-
-13-
<PAGE>
compliance which would not have a Material Adverse Effect. The Company has
timely filed all reports with the SEC as is required by the Securities Act and
Exchange Act and the Rule 144 exemption is available to qualified holders of
Stock of the Company.
Section 5.5 Subsidiaries. Except with respect to the
------------
acquisition of MPM and as listed on the Schedule 5.5, there currently exist no
------------
Subsidiaries of the Company and the Company has no equity interest in any other
Person.
Section 5.6 Corporate Power: Authorization: Enforceable
-------------------------------------------
Obligations. The execution, delivery, and performance by the Company of
- -----------
this Agreement, the other Transaction Documents to which it is a party and all
instruments and documents to be delivered by the Company, the issuance and sale
of the Initial Purchased Securities, and the Additional Purchased Securities
purchased pursuant to the Guaranty or the Fund Guaranty, and the consummation of
the other transactions contemplated by any of the foregoing (subject to the
reclassification of the Convertible Preferred into the Series A Convertible
Preferred in accordance with Section 6.1(d)): (i) are within the Company's
--------------
corporate power and authority, (ii) have been duly authorized by all necessary
or proper corporate action; (iii) are not in contravention of any provision of
the Company's Certificate of Incorporation or by-laws; (iv) will not violate any
law or regulation, or any order or decree of any court or governmental
instrumentality; (v) will not conflict with or result in the breach or
termination of, constitute a default under or accelerate any performance
required by, any indenture, mortgage, deed of trust, lease, agreement or other
instrument to which the Company is a party or by which the Company or any of
their property is bound, (vi) will not result in the creation or imposition of
any Lien upon the capital stock or any of the property of the Company; and (vii)
do not require the consent or approval of, or any filing with, any Governmental
Authority or any other Person (except to the extent previously obtained or
made). Except for the Shareholder Approval, the execution, delivery and
performance of this Agreement and the transactions contemplated herein do not
require approval or consent of the shareholders or other holders of Stock of the
Company or the approval or authorization of any Governmental Authority, NASDAQ
(except for the listing of additional shares pursuant to NASD Rule 4310(c)(17)
regarding notice of issuance of additional securities), other securities
exchange or any other Person. Each of this Agreement and the other Transaction
Documents shall have been duly executed and delivered by the Company and each
shall then constitute a legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
Section 5.7 Financial Statements.
--------------------
(a) The audited financial statements of the Company
dated as of December 31, 1998 (the "Financials") have been prepared in
----------
accordance with the books and records of the Company, present fairly the
financial condition of the Company as of the respective dates
-14-
<PAGE>
indicated and the results of operations for the respective periods indicated,
and have been prepared in accordance with GAAP applied on a consistent basis.
(b) Except as set forth on Schedule 5.7 or the Annual
------------
Report, the Company has no material obligations, contingent or otherwise,
including, without limitation, liabilities for Charges, long-term leases or
long-term commitments which are not reflected in the Financials, other than
those incurred since December 31, 1998, in the ordinary course of business (none
of which is a liability resulting from breach of contract, breach of warranty,
tort, infringement, or any claim or lawsuit).
(c) No dividends or other distributions have been
declared, paid or made upon any Stock of the Company, nor has any Stock of the
Company been redeemed, retired, purchased or otherwise acquired for value by the
Company since December 31, 1998.
Section 5.8 Ownership of Property.
---------------------
(a) The Company does not own any real estate. Except
as set forth on Schedule 5.8 or the Annual Report, the Company owns, has a valid
------------
leasehold interest in, or has a valid license to use, all material assets,
properties and rights, whether tangible or intangible, necessary for the conduct
of its business as presently conducted and as presently proposed to be
conducted.
(b) All real property leased by the Company is set
forth on Schedule 5.8 or the Annual Report. Each of such leases is valid and
------------
enforceable in accordance with its terms (subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity)) and is in full force
and effect. Except as set forth on Schedule 5.8 or the Annual Report, the
------------
Company is not in default of its obligations under any material lease or has it
delivered or received any notice of default under any such lease, nor to the
knowledge of the Company has any event occurred which, with the giving of
notice, the passage of time or both, would constitute a default under any such
lease.
Section 5.9 Material Contracts: Indebtedness. Each Material
--------------------------------
Contract is a valid and binding agreement of the Company enforceable against the
Company in accordance with its terms (subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commerical reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity)), and the Company has
no knowledge that any Material Contract is not a valid and binding agreement
against the other parties thereto. Except as set forth in Schedule 5.9 or the
------------
Annual Report, the Company is not in material default or breach (whether with or
without the passage of
-15-
<PAGE>
time, the giving of notice or both) or in receipt of any claims of default or
breach in either case that could reasonably be expected to have a Material
Adverse Effect, nor to the Company's knowledge is any third party in default or
breach, under or with respect to any Material Contract. Except as set forth on
Schedule 5.9 or the Annual Report, the Company has no Indebtedness, except
- ------------
Permitted Indebtedness and except for indebtedness under that certain Credit
Agreement, dated as of July 13, 1999, by and between the Company and LaSalle
Bank National Association.
Section 5.10 Environmental Protection.
------------------------
(a) To the Company's actual knowledge without
independent investigation, all real property owned, leased or otherwise operated
by the Company and each Subsidiary (a "Facility") is free of contamination from
--------
any substance, waste or material (i) currently identified to be toxic or
hazardous pursuant to, or which may result in liability under, any Environmental
Law or (ii) within the definition of a substance which is toxic or hazardous
under any Environmental Law, including, without limitation, any asbestos, PCB,
radioactive substance, methane, volatile hydrocarbons, industrial solvents, oil
or petroleum or chemical liquids or solids, liquid or gaseous products, or any
other material or substance which has in the past or could at any time in the
future cause or constitute a health, safety, or environmental hazard to any
Person or property or result in any Environmental Liabilities and Costs
("Hazardous Substance") of more than $25,000 or which, in either case, could
-------------------
have a Material Adverse Effect. Nor has the Company caused or suffered to occur
any release, Spill, migration, leakage, discharge, spillage, uncontrolled loss,
seepage, or filtration of Hazard Substances at or from the Facility (a "Spill")
-----
which could result in Environmental Liabilities and Costs in excess of $25,000.
(b) The Company and each Subsidiary has generated,
treated, stored and disposed of any Hazardous Substances in full compliance with
applicable Environmental Laws, except for such non-compliances which would not
have a Material Adverse Effect.
(c) The Company and each Subsidiary has obtained, or
has applied for, and is in full compliance with and in good standing under all
permit required under Environmental Laws (except for such failures which would
not have a Material Adverse Effect). The Company does not have any knowledge of
any proceedings to substantially modify or to revoke any such permit.
(d) There are no investigations, proceedings or
litigation pending or, to the Company's knowledge, threatened, affecting or
against the Company or the Facilities relating to Environmental Laws or
Hazardous Substances.
(e) Since April 25, 1997, the Company has not
received any communication or notice (including, without limitation, requests
for information) indicating the potential of Environmental Liabilities and Costs
against the Company.
-16-
<PAGE>
Section 5.11 Labor Matters.
-------------
(a) There are no strikes or other labor disputes
against the Company pending or to the Company's knowledge threatened. Hours
worked by and payment made to employees of the Company have not been in
violation of the Fair Labor Standards Act or any other applicable law dealing
with such matters. All payments due from the Company on account of employee
health and welfare insurance have been paid or accrued as a liability on the
books of the Company. There is no organizing activity involving the Company
pending or, to the Company's knowledge, threatened by any labor union or group
of employees that individually or in the aggregate could reasonably be expected
to have a Material Adverse Effect. There are no representation proceedings
pending or, to the Company's knowledge, threatened with the National Labor
Relations Board, and no labor organization or group of employees of the Company
has made a pending demand for recognition. Except as set forth on Schedule 5.11,
-------------
there are no complaints or charges against the Company pending or, to the
Company's knowledge, threatened to be filed with any federal, state, local or
foreign court, governmental agency or arbitrator based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment by the Company of any individual.
(b) The Company is not, and during the five years
preceding the date hereof was not, a party to any labor or collective bargaining
agreement and there are no labor or collective bargaining agreements which
pertain to employees of the Company.
Section 5.12 Taxes. All federal, state, local and foreign tax
-----
returns, reports and statements required to be filed by the Company and each
Affiliated Group have been timely filed with the appropriate Governmental
Authority except where the failure to file such report or statement would not
have a Material Adverse Effect and all such returns, reports and statements are
true, correct and complete in all material respects. All Charges and other
impositions due and payable for the periods covered by such returns, reports and
statements have been paid prior to the date on which any fine, penalty, interest
or late charge may be added thereto for nonpayment thereof or any such fine,
penalty, interest or late charge has been paid. Proper and accurate amounts have
been withheld by the Company from its employees, independent contractors, or
other third parties for all periods in full and complete compliance with the
tax, social security and unemployment withholding provisions of applicable
federal, state, local and foreign law and such withholdings have been timely
paid to the respective governmental agencies. The Company has not executed or
filed with the IRS or any other Governmental Authority any agreement or other
document extending, or having the effect of extending, the period for assessment
or collection of any Charges. No tax audits or other administrative or judicial
proceedings are pending or threatened with regard to any Charges for which the
Company may be liable and which would reasonably be expected to have a Material
Adverse Effect and no assessment of Charges is proposed against the Company. The
Company has not filed a consent pursuant to IRC Section 341(f) or agreed to have
IRC Section 341(f)(2) apply to any dispositions of subsection (f) assets (as
such term is defined in IRC Section 341(f)(4)). None of the property owned by
the Company is property which such the Company is required to treat as being
owned by any other Person pursuant to the provisions of Section 168(f)(8) of the
Internal
-17-
<PAGE>
Revenue Code of 1954, as amended, and in effect immediately prior to the
enactment of the Tax Reform Act of 1986 or is "tax-exempt" use property, within
the meaning of IRC Section 168(h). The Company has not agreed or has been
requested to make any adjustment under IRC Section 481(a) by reason of a change
in accounting method or otherwise. The Company has no obligation under any
written tax sharing agreement. The Company is not a party to or bound by any tax
allocation or tax sharing agreement and has no current or potential contractual
obligation to indemnify any other person with respect to any Charges. The
Company has not made any payments, and is not and will not become obligated
(under any contract entered into on or before the Initial Closing Date) to make
any payments, that will be non-deductible under Section 280G of the IRC (or any
corresponding provision of state, local or foreign income tax law). The Company
will not be required (A) as a result of a change in method of accounting for a
taxable period ending on or prior to the Initial Closing Date, to include any
adjustment in taxable income for any taxable period (or portion thereof) ending
after the Initial Closing Date or (B) as a result of any deferred intercompany
gain described in Treasury Regulation Sections 1. 1502-13 of former Treasury
Regulations Section 1. 1502-14 or any excess loss account described in Treasury
Regulation Section 1. 1502-19 (or any corresponding or similar provision or
administrative rule of federal, state, local or foreign income tax law), to
include any item of income in taxable income for any taxable period (or portion
thereof) ending after the Initial Closing Date, in each case, which would
reasonably be expected to have a Material Adverse Effect. The Company has not
been a member of an Affiliated Group other than one of which the Company was the
common parent, or filed or been included in a combined, consolidated or unitary
income tax return, other than one filed by the Company.
Section 5.13 No Litigation. Except as set forth on Schedule
------------- --------
5.13, no action, claim or proceeding is now pending or, to the knowledge of the
- ----
Company, threatened against the Company (or to the Company's knowledge, pending
or threatened against or affecting any of the officers, directors or employees
of the Company with respect to its business or proposed business activities), or
pending or threatened by the Company against any third party, at law, in equity
or otherwise, before any court, board, commission, agency or instrumentality of
any federal, state, or local government or of any agency or subdivision thereof,
or before any arbitrator or panel of arbitrators.
Section 5.14 Brokers. No broker or finder acting on behalf of
-------
the Company brought about the consummation of the transactions contemplated
pursuant to this Agreement and the Company has no obligation to any Person in
respect of any finder's or brokerage fees (or any similar obligation) in
connection with the transactions contemplated by this Agreement. The Company is
solely responsible for the payment of all such finder's or brokerage fees.
Section 5.15 Management and Labor Agreements. Except as set
-------------------------------
forth on Schedule 5.15 or the Annual Report, there are no management agreements
-------------
covering officers of the Company.
Section 5.16 Patents, Trademarks, Copyrights and Licenses. The
--------------------------------------------
Company owns all licenses, patents, patent applications, copyrights, service
marks, trademarks and registrations and applications for registration thereof,
and trade names necessary to continue to conduct its business as heretofore
conducted by it and now being conducted by it. To the Company's knowledge, the
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Company conducts its businesses without infringement or claim of infringement of
any license, patent, copyright, service mark, trademark, trade name, trade
secret or other intellectual property right of others and the Company has
received no notices claiming any such infringement. To the Company's knowledge,
there is no infringement by others of any license, patent, copyright, service
mark, trademark, trade name, trade secret or other intellectual property right
of the Company.
Section 5.17 No Material Adverse Effect. To the Company's
--------------------------
knowledge, no event has occurred since April 25, 1997 which has had or could be
reasonably expected to have a Material Adverse Effect; provided, however, the
Purchaser acknowledges that it has been advised that the Company has operated at
a loss and has had negative cash flow since October 31, 1998.
Section 5.18 ERISA.
-----
(a) During the twelve-consecutive-month period prior
to the date of the execution and delivery of this Agreement, (i) no steps have
been taken to terminate any Pension Plan and (ii) no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien
under Section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Pension Plan which could result in the incurrence
by the Company of any material liability, fine or penalty, other than the
obligations of the Company to fund the benefits provided under the Pension Plan.
(b) All contributions (if any) have been made to any
Multiemployer Plan that are required to be made by the Company or any other
member of the Controlled Group under the terms of the plan or of any collective
bargaining agreement or by applicable law; neither the Company nor any member of
the Controlled Group has withdrawn or partially withdrawn from any Multiemployer
Plan, incurred any withdrawal liability with respect to any such plan or
received notice of any claim or demand for withdrawal liability or partial
withdrawal liability from any such plan, and no condition has occurred which, if
continued, might result in a withdrawal or partial withdrawal from any such
plan; and neither the Company nor any member of the Controlled Group has
received any notice that any Multiemployer Pension Plan is in reorganization,
that increased contributions may be required to avoid a reduction in plan
benefits or the imposition of any excise tax, that any such plan is or has been
funded at a rate less than that required under Section 412 of the IRC, that any
such plan is or may be terminated, or that any such plan is or may become
insolvent.
(c) The Pension Plans and the trusts maintained
pursuant thereto are exempt from federal income taxation under Section 501 of
the IRC, and nothing has occurred with respect to the operation of the Pension
Plans which could cause the loss of such qualification or exemption or the
imposition of any liability, penalty, or tax under ERISA or the IRC.
(d) All contributions required by law or pursuant to
the terms of the Plans (without regard to any waivers granted under Section 412
of the IRC) to any funds or trusts established thereunder or in connection
therewith have been made by the due date thereof (including
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<PAGE>
any valid extension) and no accumulated funding deficiencies exist in any of the
Pension Plans subject to Section 412 of the IRC.
(e) There is no "amount of unfunded benefit
liabilities" as defined in Section 4001 (a) (18) of ERISA in any of the
respective Pension Plans, which are subject to Title IV of ERISA. Each of the
respective Pension Plans are fully funded in accordance with the actuarial
assumptions used by the PBGC to determine the level of funding required in the
event of the termination of the Pension Plan and all benefit liabilities do not
exceed the assets of such Pension Plans.
(f) There have been no "reportable events" as that
term is defined in Section 404 of ERISA and the regulations thereunder with
respect to the Pension Plans subject to Title IV of ERISA which would require
the giving of notice, or any event requiring disclosure under Sections
4041(c)(3)(C), 4063(a) or 4068(f) of ERISA.
(g) There is no material violation of ERISA with
respect to the filing of applicable reports, documents, and notice, regarding
the Plans with the Secretary of Labor and the Secretary of the Treasury or the
furnishing of such documents to the participants or beneficiaries of the Plans.
(h) To the knowledge of the Company, there are no
pending actions, claims or lawsuits which have been asserted or instituted
against the Plans, the assets of any of the trusts under such Plans or the plan
sponsor or the plan administrator, or against any fiduciary of the Plans with
respect to the operation of such Plans (other than routine benefit claims), nor
does the Company have knowledge of facts which could form the basis for any such
claim or lawsuit.
(i) All amendments and actions required to bring the
Plans into conformity in all material respects with all of the applicable
provisions of ERISA and other applicable laws have been made or taken except to
the extent that such amendments or actions are not required by law, regulation
or order pronounced by the IRS, to be made or taken until a date after the
applicable Closing Date.
(j) The Plans have been maintained, in all material
respects, in accordance with their terms and with all provisions of ERISA
(including rules and regulations thereunder) and other applicable Federal and
state law, and the Company or "party in interest" or "disqualified person" with
respect to the Plans has engaged in a "prohibited transaction" within the
meaning of Section 4975 of the IRC or Section 406 of ERISA.
(k) Neither the Company nor any ERISA Affiliate has
terminated any Pension Plan subject to Title IV, or incurred any outstanding
liability under Section 4062 of ERISA to the PBGC, or to a trustee appointed
under Section 4042 of ERISA.
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<PAGE>
(l) Neither the Company nor any ERISA Affiliate
maintains retiree life and retiree health insurance plans which are Welfare
Plans and which provide for continuing benefits or coverage for any participant
or any beneficiary of a participant except as may be required under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA").
-----
The Company and each ERISA Affiliate which maintains a Welfare Plan has complied
with the notice and continuation requirements of COBRA and the regulations
thereunder in all material respects.
(m) Neither the Company nor any ERISA Affiliate has
contributed or been obligated to contribute to a Multiemployer Plan as of the
applicable Closing.
(n) Neither the Company nor any ERISA Affiliate has
withdrawn in a complete or partial withdrawal from any Multiemployer Plan prior
to the applicable Closing Date, nor has any of them incurred any liability due
to the termination or reorganization of a Multiemployer Plan.
Section 5.19 Registration Rights. Except as listed on Schedule
------------------- --------
5.19 and except pursuant to the Registration Rights Agreement or as set forth in
- ----
the Annual Report, the Company is not under obligation to register any of its
securities pursuant to the Securities Act.
Section 5.20 Required Filings. As of the date hereof, the
----------------
Company has made all required filings under the Securities Act and Exchange Act
and all information contained in such filings are true and correct in all
material respects and do not contain any untrue information or omit to state a
material fact necessary to make any statements contained in such filings not
misleading in light of the circumstances under which they were made.
Section 5.21 Full Disclosure. No information contained in this
---------------
Agreement, any other Transaction Document, the Financials or any written
statement furnished by or on behalf of the Company pursuant to the terms of this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made.
Section 5.22 Schedule 14C: Shareholder Approval. The Company
----------------------------------
shall upon receiving Shareholder Approval use its best efforts to prepare and
file as promptly as practicable with the SEC a Schedule 14C Information
Statement (with respect to Rule 4460(i) of the NASDAQ Stock Market, Inc.'s
Marketplace Rules) required under the Exchange Act and take all actions
necessary to have such Schedule 14C Information Statement become effective as
promptly as practicable (but in no event later than February 28, 2000).
Section 5.23 Schedule 14C: Reclassification. Within 14
------------------------------
calendar days of the date hereof, the Company shall as promptly as practicable
prepare and file with the SEC a Schedule 14C Information Statement (with respect
to the reclassification of the Convertible Preferred into the Series A
Convertible Preferred) required under the Securities Exchange Act of 1934 and
take all actions necessary to have such Schedule 14C Information Statement
become effective as promptly as practicable and immediately upon such
effectiveness the Company shall file a Plan of Reclassification and amendment to
its Designation of Preferred Stock redesignating the Convertible Preferred into
Series A Preferred Stock (but in no event later than 45 calendar days after the
date hereof).
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<PAGE>
Section 5.24 Credit Agreement. All of the representations and
----------------
warranties contained in that certain Credit Agreement, dated as of the date
hereof, by and between MPM, CIBC, as Agent, CIBC World Markets Corp., and the
several banks and lending institutions made party thereto from time to time, are
true and correct as of the date hereof and are hereby incorporated herein by
reference.
Section 5.25 Use of Proceeds. The Company shall make use of
---------------
the proceeds from the purchase of the Initial Purchased Securities for the
limited purpose of acquiring MPM pursuant to the Stock Purchase Agreement, dated
as of dated as of July 16, 1999, between the Company and MPM, and all
representations and warranties of the Company contained therein are true and
correct as of the date hereof and, to the knowledge of the Company, all other
representations and warranties contained therein are true and correct as of the
date hereof, and all such representations and warranties are hereby incorporated
herein by reference.
ARTICLE VI
CONDITIONS PRECEDENT TO INITIAL CLOSING
Section 6.1 Conditions Precedent. The obligation of the
--------------------
Purchaser to purchase the Initial Purchased Securities pursuant to Section 2.2
-----------
hereof at the Initial Closing is subject to the condition that the Purchaser
shall have received and the following shall have been delivered to the Purchaser
on the Initial Closing Date, each dated the Initial Closing Date unless
otherwise indicated, in form and substance satisfactory to the Purchaser, and
the following actions shall occur on or before the Initial Closing Date, unless
waived by the Purchaser:
(a) A favorable opinion of Morris, Manning & Martin,
L.L.P. counsel to the Company, substantially in the form attached hereto as
Exhibit B.
- ---------
(b) Resolutions of the Board or an executive
committee or special finance committee of the Company, certified by the
Secretary or Assistant Secretary of the Company, as of the Initial Closing Date,
to be duly adopted and in full force and effect on such date, authorizing, in
the case of the Board, (i) the consummation of each of the transactions
contemplated by this Agreement and (ii) officers to execute and deliver this
Agreement and each other Transaction Document to which it is a party.
(c) A copy of governmental certificate, dated the
most recent practicable date prior to the Initial Closing Date, with telegram
updates where available, showing that the Company is organized and in good
standing in the State of Delaware and is qualified as a foreign corporation and
in good standing in all other jurisdictions in which it is qualified to transact
business.
(d) A copy of the organizational charter and all
amendments thereto of the Company, certified as of a recent date by the
Secretary of State of the State of Delaware, as amended to reflect (i) the
reduction in the number of shares of Convertible Preferred authorized in the
Original
-22
<PAGE>
Certificate of Designation from 2,000,000 shares to 309,998 shares of
Convertible Preferred and (ii) the filing of the Second Certificate of
Designation (with respect to the designation of the Series A Convertible
Preferred). A copy of the Plan of Reclassification of the Company, dated as of
the date hereof and approved by the Board and the shareholders of the Company in
accordance with Delaware General Corporation Law, shall be filed with the
Secretary of State of the State of Delaware) (the "Charter") after the filing of
-------
the Schedule 14C referenced in Section 5.23 (the "Plan of Reclassification"),
------------ ------------------------
and copies of the Company's by-laws, both certified by the Secretary or
Assistant Secretary of the Company as true and correct as of the Initial Closing
Date.
(e) Certificates of the Secretary or an Assistant
Secretary of the Company, dated the Initial Closing Date, as to the incumbency
and signatures of the officers of the Company executing this Agreement, the
Initial Purchased Securities, each other Transaction Document to which it is a
party and any other certificate or other document to be delivered pursuant
hereto or thereto, together with evidence of the incumbency of such Secretary or
Assistant Secretary.
(f) A copy of all third party consents and approvals
(including, without limitation, the consent of LaSalle Bank National
Association, to the extent required) that are necessary for the consummation of
the transactions contemplated hereby or that are required in order to prevent a
breach of or default under, a termination or modification of, or acceleration of
the terms of, any contract, agreement or document required to be listed on the
attached Schedule 5.9 or the Annual Report, in each case on terms and conditions
------------
reasonably satisfactory to the Purchaser.
(g) A copy of all governmental and regulatory
consents and approvals that are necessary for the consummation of the
transactions contemplated hereby, in each case on terms and conditions
satisfactory to the Purchaser.
(h) No suit, action or other proceeding shall be
pending before any court or governmental regulatory body or authority in which
it is sought to restrain or prohibit the transactions contemplated hereby, or
that could have a Material Adverse Effect, and no injunction, judgment, order,
decree or ruling with respect thereto shall be in effect.
(i) Since the December 31, 1998, there shall have
been no material adverse change or material adverse development in the business,
financial condition, business prospects, operating results, assets, operations
or customer, supplier or employee relations of the Company.
(j) The Company shall have delivered to the Purchaser
a copy of the fairness opinion (the "Fairness Opinion") relating to the
----------------
transaction contemplated herein from Texada Capital Corporation, which fairness
opinion shall indicate that the price for the Series A Convertible Preferred
purchased pursuant to Section 2.2 is fair to the Company and its stockholders
-----------
(other than as to the Purchaser).
(k) The Initial Purchased Securities shall have been
delivered to the Purchaser.
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<PAGE>
(l) The number of shares of Convertible Preferred
authorized in the Original Certificate of Designation shall have been reduced by
duly authorized Board action from 2,000,000 shares to 309,998 shares of
Convertible Preferred and the Second Certificate of Designation containing the
terms of the Series A Convertible Preferred, Plan of Reclassifications and
redesignations of the Convertible Preferred to Series A Convertible Preferred,
shall have been duly adopted by Board action and filed with the Secretary of the
State of Delaware.
(m) WSP shall receive a fairness opinion from CIBC
relating to the transaction contemplated herein, which fairness opinion shall
indicate that the transactions herein are fair to Willis Stein & Partners, L.P.
and its affiliates.
ARTICLE VII
CONDITIONS PRECEDENT TO SUBSEQUENT CLOSING
Section 7.1 Conditions Precedent. The obligation of the
--------------------
Purchaser to purchase the Additional Purchased Securities at any Subsequent
Closing pursuant to Section 3.2 hereof is subject to the condition that the
-----------
Purchaser shall have received and the following shall have been delivered to the
Purchaser on each Subsequent Closing Date, each dated as of such Subsequent
Closing Date unless otherwise indicated, in form and substance satisfactory to
the Purchaser, and the following actions shall occur on or before each
Subsequent Closing Date, unless waived in writing by the Purchaser:
(a) The representations and warranties of the Company
contained in Article V shall be true and correct in all material respects as if
---------
made on such Subsequent Closing Date.
(b) There shall not have occurred or be continuing
any "Event of Noncompliance" or "Special Event of Noncompliance" with respect to
the Series A Convertible Preferred, as such terms are defined in the Second
Certificate of Designation.
(c) If the proposed use of the funds is to consummate
an acquisition, then the Purchaser shall have completed its business, legal,
accounting and other due diligence investigation and evaluation of the Company
and its affiliates and shall be satisfied in its sole discretion with the result
thereof and with the documentation relating to such acquisition.
(d) If the proposed use of the funds is for working
capital purposes, then the Purchaser shall be satisfied in its sole discretion
with the intended use of funds.
(e) The Purchaser shall have received all necessary
internal approvals for the purchase of such Additional Purchases Securities and
shall be satisfied with the use of proceeds of its financing in each case in its
sole discretion.
(f) The Purchaser shall have received a favorable
opinion of Morris, Manning
-24-
<PAGE>
& Martin L.L.P., counsel to the Company, substantially in the form attached
hereto as Exhibit B.
---------
(g) The Purchaser shall have received funding from
its members in amounts sufficient to pay the purchase price for the Additional
Purchased Securities.
(h) Resolutions of the board of directors, executive
committee or special finance committee of the Company, certified by the
Secretary or Assistant Secretary of the Company, as of each Subsequent Closing
Date, to be duly adopted and in full force and effect on such date, authorizing
the consummation of each purchase of Additional Purchased Securities.
(i) A copy of governmental certificate, dated the
most recent practicable date prior to each Subsequent Closing Date, with
telegram updates where available, showing that the Company is organized and in
good standing in the State of Delaware and is qualified as a foreign corporation
and in good standing in all other jurisdictions in which it is qualified to
transact business.
(j) A copy of the organizational charter and all
amendments thereto of the Company, certified as of a recent date by the
Secretary of State of the State of Delaware, and copies of the Company's
by-laws, certified by the Secretary or Assistant Secretary of the Company as
true and correct as of each Subsequent Closing Date.
(k) Certificates of the Secretary or an Assistant
Secretary of the Company, dated as of Subsequent Closing Date, as to the
incumbency and signatures of the officers of the Company executing the purchase
of the Additional Purchased Securities and any other certificate or other
document to be delivered pursuant hereto or thereto, together with evidence of
the incumbency of such Secretary or Assistant Secretary.
(l) A copy of all third party consents and approvals
(including, without limitation, the consent of LaSalle Bank National Association
and/or CIBC, in each case only to the extent required) that are necessary for
the consummation of the transactions contemplated hereby or that are required in
order to prevent a breach of or default under, a termination or modification of,
or acceleration of the terms of, any contract, agreement or document in each
case on terms and conditions reasonably satisfactory to the Purchaser.
(m) A copy of all governmental and regulatory
consents and approvals that are necessary for the consummation of the
transactions contemplated hereby, in each case on terms and conditions
satisfactory to the Purchaser.
(n) No suit, action or other proceeding shall be
pending before any court or governmental regulatory body or authority in which
it is sought to restrain or prohibit the transactions contemplated hereby, or
that could have a Material Adverse Effect, and no injunction, judgment, order,
decree or ruling with respect thereto shall be in effect.
(o) Since the Initial Closing Date, there shall have
been no material adverse
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<PAGE>
change or material adverse development in the business, financial condition,
business prospects, operating results, assets, operations or customer, supplier
or employee relations of the Company.
(p) the Fairness Opinion shall not have been
withdrawn, revised or amended in any way and, at the request of the Purchaser,
the Company shall have delivered to the Purchaser an updated Fairness Opinion
relating to the transaction contemplated herein, which fairness opinion shall
indicate that the price for the Additional Purchased Securities purchased at
each Subsequent Closing pursuant to Section 3.2 is fair to the Company and its
-----------
stockholders.
(q) The Additional Purchased Securities shall be
delivered to the Purchaser.
(r) Prior to or as of each Subsequent Closing, the
Company shall have duly authorized a sufficient number of shares of Series A
Convertible Preferred to permit the issuance of the Additional Purchased
Securities purchased at each such Subsequent Closing, and the Company shall have
duly authorized a sufficient number of shares of Common Stock for the conversion
of such Additional Purchased Securities pursuant to terms and provisions listed
in the Second Certificate of Designation.
(s) The Shareholder Approval Effective Date (as
defined in the Second Certificate of Designation) shall have occurred on or
prior to February 28, 2000 in accordance with Section 5.22.
------------
(t) The Company shall have filed the Plan of
Reclassification with the Secretary of State of the State of Delaware, and such
filing shall have become effective within 45 days after the date hereof in
accordance with Section 5.23, and the Company shall have reduced the number of
------------
authorized shares of Convertible Preferred to zero.
(u) There shall have been no material change in the
Market Price (as defined in the Second Certificate of Designation) of, or in the
public market for, the Common Stock or the public markets generally.
(v) Such other documents as the Purchaser may
reasonably request.
ARTICLE VIII
SECURITIES LAW MATTERS
Section 8.1 Legends.
-------
(a) Each certificate representing the Initial
Purchased Securities or the Additional Purchased Securities shall bear a legend
substantially in the following form:
"THE STOCK REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED
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<PAGE>
BY THE HOLDER FOR ITS OWN ACCOUNT, FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO THE DISTRIBUTION OF SUCH STOCK. THE SHARES
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION THEREFROM."
Section 8.2 Transfer of Restricted Securities
---------------------------------
(a) Restricted Securities are transferable only
pursuant to (i) public offerings registered under the Securities Act, (ii) Rule
144 or Rule 144A of the Securities and Exchange Commission (or any similar rule
or rules then in force) if such rule is available and (iii) subject to the
conditions specified in subparagraph (b) below, any other legally available
means to transfer.
(b) In connection with the transfer of any Restricted
Securities (other than a transfer described in clause (i) or (ii) of
subparagraph (a) above), the holder thereof shall deliver written notice to the
Company describing in reasonable detail the transfer or proposed transfer,
together with an opinion of counsel which (to the Company's reasonable
satisfaction) is knowledgeable in securities law matters to the effect that such
transfer of Restricted Securities may be effected without registration of such
Restricted Securities under the Securities Act. In addition, if the holder of
the Restricted Securities delivers to the Company an opinion of counsel that no
subsequent transfer of such Restricted Securities shall require registration
under the Securities Act, the Company shall promptly upon such contemplated
transfer deliver new certificates or instruments, as the case may be, for such
Restricted Securities which do not bear the Securities Act legend set forth in
Section 8.1 above. If the Company is not required to deliver new certificate or
- -----------
instruments, as the case may be, for such Restricted Securities not bearing such
legend, the holder thereof shall not transfer the same until the prospective
transferee has confirmed to the Company in writing its agreement to be bound by
the conditioned contained in this Section 8.2.
-----------
(c) Upon the request of a holder of Restricted
Securities, the Company shall promptly supply to such holder or such holder's
prospective transferees all information regarding the Company required to be
delivered in connection with a transfer pursuant to Rule 144 or 144A of the
Securities and Exchange Commission.
(d) If any Restricted Securities become eligible for
sale pursuant to Rule 144(k), the Company shall, upon the request of the holder
of such Restricted Securities, remove the legend set forth in Section 7.1 from
-----------
the certificates or instruments, as the case may be, representing such
Restricted Securities.
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<PAGE>
ARTICLE IX
EXPENSES
The Company shall pay all reasonable out-of-pocket expenses of
(i) the Purchaser in connection with the preparation, review or negotiation of
the Transaction Documents and the transactions contemplated thereby, including
cost incurred in connection with the Initial Closing and each Subsequent
Closing, (ii) stamp and other taxes which may be payable in respect of the
execution and delivery of this Agreement, the issuance and delivery of the
Initial Purchased Securities or the Additional Purchased Securities, and the
issuance and delivery of any Common Stock upon the conversion of the Series A
Convertible Preferred and (iii) the Purchaser or its managing member in
connection with (A) any amendment, modification or waiver, or consent with
respect to, any of the Transaction Documents, and (B) any attempt by the
Purchaser or its managing member to enforce any of its rights against the
Company or any other Person under or pursuant to of any of the Transaction
Documents (including the reasonable fees and expenses of all of its counsel and
consultants retained in connection with the Transaction Documents and the
transactions contemplated thereby).
ARTICLE X
LIMITATION ON CLAIMS OF THE PURCHASER
Section 10.1 Limitation.
----------
(a) The Purchaser shall not bring any action or claim
against the Company for damages for a breach of any representation, warranty or
covenant contained herein by the Company until such damages exceed $100,000 at
which time the Purchaser may bring an action for all claims.
(b) The Company shall not bring any action or claims
against the Purchaser for damages for a breach of any representation, warranty
or covenant contained herein by the Purchaser until such damages exceed
$100,000, at which time the Company may bring an action for all claims.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices. Whenever it is provided herein that any
-------
notice, demand, request, consent, approval, declaration or other communication
shall or may be given to or served upon any of the parties by another, or
whenever any of the parties desires to give or serve upon another any such
communication with respect to this Agreement, each such notice, demand, request,
consent, approval, declaration or other communication shall be in writing and
either shall be delivered in person with receipt acknowledged or by registered
or certified mail, return receipt requested, postage prepaid, or by telecopy and
confirmed by telecopy answerback addressed as follows:
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<PAGE>
If to the Purchaser:
U-C Holdings, L.L.C.
227 W. Monroe Street, Suite 4300
Chicago, Illinois 60606
Attn: Avy H. Stein
Daniel M. Gill
Telecopy No.: (312) 422-2424
with a copy to:
Kirkland & Ellis
200 E. Randolph Street
Chicago, Illinois 60601
Attn: Margaret A. Gibson, Esq.
Telecopy No.: (312) 861-2200
If to the Company:
College Television Network, Inc.
5784 Lake Forrest Drive
Suite 275
Atlanta, GA 30328
Attn: Jason Elkin
Telecopy No.: (404) 256-9168
with copies to:
Morris, Manning & Martin, L.L.P.
3343 Peachtree Road, N.E.
1600 Atlanta Financial Center
Atlanta, Georgia 30326
Attn: Neil H. Dickson, Esq.
Telecopy No.: (404) 365-9532
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback, or
three (3) Business Days after the same shall have been deposited with the United
States mail.
Section 11.2 Binding Effect: Benefits. Except as otherwise
------------------------
provided herein, this
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<PAGE>
Agreement shall be binding upon and inure to the benefit of the parties to this
Agreement and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended or shall be construed to give any
person other than the parties to this Agreement or their respective successors
or assigns any legal or equitable right, remedy or claim under or in respect of
any agreement or any provision contained herein.
Section 11.3 Amendment. No amendment or waiver of any
---------
provision of this Agreement or any other Transaction Document nor consent to any
departure by the Company therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Company and the Purchaser, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. No action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action, of compliance with any representations, warranties, covenants or
agreements contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
preceding or succeeding breach and no failure by either party to exercise any
right or privilege hereunder shall be deemed a waiver of such party's rights or
privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
Section 11.4 Successors and Assigns: Assignability. Neither
-------------------------------------
this Agreement nor any right, remedy, obligation or liability arising hereunder
or by reason hereof shall be assignable by the Company without the prior written
consent of the Purchaser. All covenants contained herein shall bind and inure to
the benefit of the parties hereto and their respective successors and assigns
(including any subsequent holder of any of the Initial Purchased Securities, the
Additional Purchased Securities or any Common Stock issuable upon exercise of
the Initial Purchased Securities or the Additional Purchased Securities).
Section 11.5 Remedies. The Purchaser, in addition to being
--------
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach of the provisions of this Agreement and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate. In any action or proceeding brought to enforce
any provision of this Agreement or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
Section 11.6 Section and Other Headings. The section and other
--------------------------
headings contained in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
Section 11.7 Severability. In the event that any one or more
------------
of the provisions contained in this Agreement shall be determined to be invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision or provisions in every
-30-
<PAGE>
other respect and the remaining provisions of this Agreement shall not be in any
way impaired.
Section 11.8 Entire Agreement. This Agreement and the
----------------
agreements and documents referred to herein contain the entire agreement and
understanding between the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, whether written or oral,
relating to such subject matter in any way.
Section 11.9 Counterparts. This Agreement may be executed in
------------
any number of counterparts, each of which shall be deemed to be an original and
all of which together shall be deemed to be one and the same instrument.
Section 11.10 Publicity. Neither the Purchaser nor the Company
---------
shall issue any press release or make any public disclosure regarding the
transactions contemplated hereby unless such press release or public disclosure
is approved by the other party in advance. Notwithstanding the foregoing, each
of the parties hereto may, in documents required to be filed by it with the SEC
or other regulatory bodies, make such statements with respect to the
transactions contemplated hereby as each may be advised by counsel is legally
necessary or advisable, and may make such disclosure as it is advised by its
counsel is required by law.
Section 11.11 Governing Law. This Agreement shall be governed
-------------
by, construed and enforced in accordance with, the laws of the Delaware without
regard to the principles thereof relating to conflict of laws. Service of
process on the parties in any action arising out of or relating to this
Agreement shall be effective if mailed to the parties in accordance with
Section 11.1 hereof. The parties hereto waive all right to trial by jury in any
- ------------
action or proceeding to enforce or defend any rights under this Agreement.
Section 11.12 No Strict Construction. The language used in
----------------------
this Agreement shall be deemed to be the language chosen by the parties hereto
to express their mutual intent, and no rule of strict construction shall be
applied against any party.
* * * * *
-31-
<PAGE>
-32-
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser has executed
this Agreement as of the day and year first above written.
COLLEGE TELEVISION NETWORK, INC.
By: /s/ Martin Grant
Its: President
U-C HOLDINGS, L.L.C.
By: WILLIS STEIN & PARTNERS, L.P.
Its: Managing Member
By: Willis Stein & Partners, L.L.C.
Its: General Partner
By: /s/ Daniel M. Gill
----------------------------------
Daniel M. Gill
Its: Managing Director
<PAGE>
CANCELLATION AGREEMENT
----------------------
THIS CANCELLATION AGREEMENT (the "Agreement") dated as of August 31, 1999,
---------
is made by and between College Television Network, Inc., a Delaware corporation
having an office at 5784 Lake Forrest Drive, Suite 275, Atlanta, GA 30328 (the
"Company"), and U-C Holdings, L.L.C., a Delaware limited liability company (the
- --------
"Purchaser").
---------
WHEREAS, the Company and the Purchaser entered into a Purchase Agreement,
dated as of July 23, 1999 (the "Purchase Agreement") whereby, in addition to
------------------
other transactions contained therein, the Purchaser purchased from the Company a
Class D Warrant to purchase 135,686 shares of the Company's common stock, par
value $0.005 (the "Class D Warrant").
---------------
WHEREAS, the Company and the Purchaser now wish to cancel and terminate the
Class D Warrant in accordance with Section 11(g) thereof.
-------------
NOW, THEREFORE, the parties hereto agree as follows:
1. Cancellation. The Purchaser hereby agrees, unconditionally and without
------------
reservation, to surrender and deliver the Class D Warrant to the Company for
cancellation, as of the date hereof, without any payment of cash or other
consideration to the Purchaser and the Company agrees to cancel such Class D
Warrant upon receipt from the Purchaser.
2. Binding Effect; Benefits. This Agreement shall be binding upon and
------------------------
inure to the benefit of the parties to this Agreement and their respective
successors and their assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person other than the Purchaser and
the Company or their respective successors or assigns any legal or equitable
right, remedy or claim under or in respect of any agreement or any provision
contained herein.
3. Amendment. No amendment to this Agreement shall be effective unless
---------
the same shall be in writing and signed by the Company and Purchaser.
4. Entire Agreement. This Agreement contains the entire agreement and
----------------
understanding between the parties with respect to the subject matter hereof and
supersede all prior agreements and understanding, whether written or oral,
relating to such subject matter in any way.
5. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
<PAGE>
6. Governing Law. This Agreement shall be governed by, construed and
-------------
enforced in accordance with, the laws of the Delaware without regard to the
principles thereof relating to conflict of laws. Service of process on the
parties in any action arising out of or relating to this Agreement shall be
effective if mailed to the parties in accordance with Section 9.1 of the
-----------
Purchase Agreement. The parties hereto waive all right to trial by jury in any
action or proceeding to enforce or defend any rights under this Agreement.
7. No Strict Construction. The language used in this Agreement shall be
----------------------
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
* * * * *
-2-
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser has executed this
Termination Agreement as of the day and year first above written.
COLLEGE TELEVISION NETWORK, INC.
By: /s/ Peter Kauff
-------------------------------------------
Its: Asst. Secretary
------------------------------------------
U-C HOLDINGS, L.L.C.
By: WILLIS STEIN & PARTNERS, L.P.
Its: Managing Member
By: Willis Stein & Partners, L.L.C.
Its.: General Partner
By:/s/ Daniel M. Gill
------------------------------------
Daniel M. Gill
Its: Managing Director
-3-
<PAGE>
SECOND CERTIFICATE OF DESIGNATION,
POWERS, PREFERENCES AND RIGHTS OF THE
SERIES A CONVERTIBLE PREFERRED STOCK
OF
COLLEGE TELEVISION NETWORK, INC.
_________________________________________________________________
Pursuant to the provisions of Section 151(g)
of the General Corporation Law of
the State of Delaware
_________________________________________________________________
College Television Network, Inc., (the "Corporation") a corporation
-----------
organized and validly existing under the General Corporation Law of the State of
Delaware, filed its original Certificate of Incorporation with the Corporations
Division on August 17, 1989. Under the provisions of and subject to the
requirements Section 151(g) of the General Corporation Law of the State of
Delaware, the undersigned, desiring (i) to decrease the number of shares of
preferred stock of the Corporation subject to the Certificate of Designation,
Powers, Preferences and Rights of the Convertible Preferred Stock filed with the
Corporations Division on July 22, 1999 (the "Original Certificate of
-----------------------
Designation"), and (ii) to set the designation, powers, preferences and rights
- -----------
of the remaining authorized but unissued preferred stock of the Corporation,
does hereby certify that the following resolutions were duly adopted by the
Board of Directors of the Corporation at a special meeting held on August 30,
1999 and approved by a unanimous vote of the holders of the issued and
outstanding Convertible Preferred Stock:
WHEREAS, the Amended and Restated Certificate of Incorporation, dated
November 10, 1997 ("Amended Certificate"), authorizes a class of stock
-------------------
designated as preferred stock (the "Preferred Stock"), comprising 2,000,000
---------------
shares, par value $0.001 per share, provides that such Preferred Stock may be
issued from time to time in one or more series, and vests authority in the Board
of Directors of the Corporation, within the limitations and restrictions stated
in the FOURTH paragraph of the Amended Certificate, to fix or alter the voting
powers, designation, preferences and relative participating, optional or other
special rights, rights and terms of redemption, the redemption price or prices
and the liquidation preferences of any series of Preferred Stock within the
limitations set forth in the Delaware General Corporation Law;
WHEREAS, the Original Certificate of Designation designated 2,000,000
shares of the authorized Preferred Stock as Convertible Preferred Stock (the
"Convertible Preferred");
---------------------
WHEREAS, it is the desire of the Board of Directors of the Corporation to
decrease the number of shares of Convertible Preferred subject to the Original
Certificate of Designation;
WHEREAS, as of the date hereof, there are 309,998 issued and outstanding
shares of Convertible Preferred;
WHEREAS, based on the foregoing, there are 1,690,002 shares of authorized
and unissued Convertible Preferred; and
WHEREAS, the Board of Directors by resolutions in accordance with Section
151(g) of the General Corporation Law of the State of Delaware has reduced the
number of shares of Convertible Preferred by 1,609,022, to 309,998; and
<PAGE>
WHEREAS, by unanimous written consent, dated as of August 30, 1999, the
holders of all of the issued and outstanding shares of Convertible Preferred
have approved the decrease in the designated authorized shares of Convertible
Preferred; and
WHEREAS, by the action of the Board of Directors to decrease the number of
shares of Preferred Stock subject to the Original Certificate of Designation,
such authorized but unissued shares of Convertible Preferred shall resume the
status which they had prior to the Original Certificate of Designation, i.e.
that of Preferred Stock subject to the FOURTH paragraph of the Amended
Certificate;
WHEREAS, it is the desire of the Board of Directors of the Corporation to
designate a new series of Preferred Stock and to fix the voting powers,
designations, preferences and rights, and the qualifications, limitations or
restrictions thereof, as provided herein.
NOW, THEREFORE, BE IT RESOLVED, that the Corporation, does hereby reduce
the number of shares of Convertible Preferred subject to the Original
Certificate of Designation to 309,998;
FURTHER RESOLVED, that the Corporation, does hereby authorize that the
1,690,002 shares of authorized but unissued Convertible Preferred shall resume
the status which they had prior to the Original Certificate of Designation and,
thereafter, be Preferred Stock subject to the FOURTH paragraph of the Amended
Certificate;
FURTHER RESOLVED, that the Corporation, by resolution of the Board of
Directors of the Corporation, does hereby cancel any previous rights,
preferences or designations for the authorized but unissued Convertible
Preferred which were set forth in the Original Certificate of Designation and
does hereby designate 1,690,002 shares of the heretofore authorized but unissued
Preferred Stock as Series A Convertible Preferred Stock (the "Class A
-------
Convertible Preferred") and does hereby fix the powers, preferences and relative
- ---------------------
participating, optional or other special rights and qualifications, limitations
or restrictions of the Class A Convertible Preferred to be as follows:
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
SERIES A PREFERRED STOCK TERMS
------------------------------
Section 1. Dividends.
---------
1A. General Obligation.
------------------
(i) When and as declared by the Corporation's board of directors,
and to the extent permitted under the General Corporation Law of Delaware, the
Corporation shall pay preferential dividends in cash to the holders of the
Series A Convertible Preferred Stock (the "Series A Convertible Preferred") as
------------------------------
provided in this Section 1. Dividends on each share of the Series A Convertible
---------
Preferred (a "Share") shall accrue on a daily basis at the rate of 12% per annum
-----
on the Liquidation Value thereof plus all accumulated and unpaid dividends
thereon from and including the date of issuance of such Share to and including
the first to occur of (i) the date on which the Liquidation Value of such Share
(plus all accrued and unpaid dividends thereon) is paid to the holder thereof in
connection with the liquidation of the Corporation or the redemption of such
Share by the Corporation, (ii) the date on which such Share is converted into
shares of Conversion Stock hereunder or (iii) the date on which such share is
otherwise acquired by the Corporation.
(ii) Such dividends shall accrue whether or not they have been
declared and whether or not there are profits, surplus or other funds of the
Corporation legally available for the payment of the dividends, and such
dividends shall be cumulative such that all accrued and unpaid dividends shall
be fully paid or declared with funds irrevocably set apart for payment before
any dividends, distributions, redemptions or other payments may be made with
respect to any Junior Securities. The date on which the Corporation initially
issues any Share shall be deemed to be its "date of issuance" regardless of the
----------------
number of times transfer of such Share is made on the stock records maintained
by or for the Corporation and regardless of the number of certificates which may
be issued to evidence such Share.
1B. Dividend Reference Dates. To the extent not paid on March 31,
------------------------
June 30, September 30 and December 31 of each year, beginning September 30, 1999
(the "Dividend Reference Dates"), all dividends which have accrued on each Share
------------------------
outstanding during the three-month period (or other period in the case of the
initial Dividend Reference Date) ending upon each such Dividend Reference Date
shall be accumulated and shall remain accumulated dividends with respect to such
Share until paid to the holder thereof. Such accumulated dividends shall not be
payable until conversion of such Share into Conversion Stock, unless earlier
declared by the Corporation's board of directors.
1C. Distribution of Partial Dividend Payments. Except as otherwise
-----------------------------------------
provided herein, if at any time the Corporation pays less than the total amount
of Dividends then accrued with respect to the Series A Convertible Preferred,
such payment shall be distributed pro rata among the holders thereof based upon
the number of Shares held by each such holder.
<PAGE>
1D. Participating Dividends. In the event that the Corporation
-----------------------
declares or pays any dividends upon the Common Stock (whether payable in cash,
securities or other property) other than dividends payable solely in shares of
Common Stock, the Corporation shall also declare and pay to the holders of the
Series A Convertible Preferred at the same time that it declares and pays such
dividends to the holders of the Common Stock, the dividends which would have
been declared and paid with respect to the Common Stock issuable upon conversion
of the Convertible Preferred had all of the outstanding Series A Convertible
Preferred been converted immediately prior to the record date for such dividend,
or if no record date is fixed, the date as of which the record holders of Common
Stock entitled to such dividends are to be determined.
Section 2. Liquidation.
-----------
Upon any liquidation, dissolution or winding up of the Corporation (whether
voluntary or involuntary), subject to the provisions of any outstanding Senior
Securities, each holder of Series A Convertible Preferred shall be entitled to
be paid, before any distribution or payment is made upon any Junior Securities,
an amount in cash equal to the greater of the following: (a) the aggregate
Liquidation Value of all Shares held by such holder (plus all accrued and unpaid
dividends thereon) and (b) the aggregate amount that would receivable by such
holder of Series A Convertible Preferred if the Series A Convertible Preferred
held by such holder had been converted into Conversion Stock in accordance with
Section 6 immediately prior to such distribution of payment. Upon such
- ---------
distribution or payment, the holders of Series A Convertible Preferred shall not
be entitled to any further payment. If upon any such liquidation, dissolution or
winding up of the Corporation the Corporation's assets to be distributed among
the holders of the Series A Convertible Preferred are insufficient to permit
payment to such holders of the aggregate among which they are entitled to be
paid under this Section 2, then the entire assets available to be distributed
---------
to the Corporation's stockholders shall be distributed pro rata among such
holders of the Series A Convertible Preferred based upon the aggregate
Liquidation Value (plus all accrued and unpaid dividends) of the Series A
Convertible Preferred held by each such holder. Not less than 60 days prior to
the liquidation, dissolution or winding up of the Corporation, the Corporation
shall mail written notice of any such liquidation, dissolution or winding up to
each record holder of Series A Convertible Preferred, setting forth in
reasonable detail the amount of proceeds to be paid with respect to each Share
and each share of Common Stock in connection with such liquidation, dissolution
or winding up. Upon the election of the holders of a majority of the outstanding
Shares, any consolidation or merger of the Corporation into or with any other
entity or entities (whether or not the Corporation is the surviving entity), or
any sale or transfer by the Corporation of all or any part of its assets, shall
be deemed to be a liquidation, dissolution or winding up of the Corporation
within the meaning of this Section 2.
---------
Section 3. Priority of Series A Convertible Preferred on Dividends.
-------------------------------------------------------
So long as any Series A Convertible Preferred remains outstanding, subject
to the provision of any outstanding Senior Securities, the Corporation shall
not, nor shall it permit any Subsidiary to, redeem, purchase or otherwise
acquire directly or indirectly any Junior Securities, provided that the
Corporation may repurchase shares of Common Stock from present or former
employees or
<PAGE>
consultants of the Corporation and its Subsidiaries, nor shall the Corporation
directly or indirectly pay any dividend or make any distribution upon any Junior
Securities if at the time of or immediately after any such redemption, purchase,
acquisition, dividend or distribution the Corporation has failed to pay the full
amount of dividends accrued on the Series A Convertible Preferred or the
Corporation has failed to make any redemption of the Series A Convertible
Preferred required hereunder.
Section 4. Redemptions.
-----------
4A. Scheduled Redemptions. At the election of the holders of a
---------------------
majority of the outstanding Shares, the Corporation shall redeem all outstanding
Shares of Series A Convertible Preferred on July 23, 2006, at a price per Share
(the "Redemption Price") equal to the greater of the following: (a) the
----------------
Liquidation Value thereof (plus all accrued and unpaid dividends thereon) and
(b) the Market Price of the Common Stock issuable upon conversion of the Series
A Convertible Preferred.
4B. Redemption Payments. For each Share which is to be redeemed
-------------------
hereunder, the Corporation shall be obligated on the Redemption Date to pay to
the holder thereof (upon surrender by such holder at the Corporation's principal
office of the certificate representing such Share) an amount in cash from
immediately available funds at a price per Share equal the Redemption Price. If
funds of the Corporation which are legally available for redemption of Shares on
any Redemption Date are insufficient to redeem the total number of Shares to be
redeemed on such date, those funds which are legally available shall be used to
redeem the maximum possible number of Shares pro rata among the holders of the
Shares to be redeemed based upon the aggregate Redemption Price payable to each
such holder, subject to the provisions of any outstanding Senior Securities. At
any time thereafter when additional funds of the Corporation are legally
available for the redemption of Shares, such funds shall immediately be used to
redeem the balance of the Shares which the Corporation has become obligated to
redeem on any Redemption Date but which it has not redeemed.
4C. Determination of the Number of Each Holder's Shares to be
---------------------------------------------------------
Redeemed. The number of Shares of Series A Convertible Preferred to be redeemed
- --------
from each holder thereof in redemptions hereunder shall be the number of Shares
determined by multiplying the total number of Shares to be redeemed times a
fraction, the numerator of which shall be the total number of Shares then held
by such holder and the denominator of which shall be the total number of Shares
then outstanding.
4D. Dividends After Redemption. No Share shall be entitled to any
--------------------------
dividends accruing after the date on which a redemption consideration of such
Share (including all accrued and unpaid dividends thereon) is paid to the holder
of such Share. On such date, all rights of the holder of such Share shall cease,
and such Share shall no longer be deemed to be issued and outstanding.
4E. Redeemed or Otherwise Acquired Shares. Any Shares which are
-------------------------------------
redeemed or otherwise acquired by the Corporation shall be canceled and retired
to authorized but unissued shares and shall not reissued, sold or transferred.
<PAGE>
Section 5. Voting Rights. The holders of the Series A Convertible
-------------
Preferred shall be entitled to notice of all stockholders meetings in accordance
with the Corporation's bylaws, and after the Shareholder Approval Effective
Date, the holders of the Series A Convertible Preferred shall be entitled to
vote on all matters submitted to the stockholders for a vote (including the
election of directors), such that the holders of the Series A Convertible
Preferred shall vote together with the holders of the Common Stock as a single
class, with each Share of Series A Convertible Preferred being entitled to vote
on an as-if-converted basis based on the number of shares of Conversion Stock
into which such Share of Series A Convertible Preferred is convertible as of the
Original Issue Date. Prior to the Shareholder Approval Effective Date, except as
otherwise required by applicable law, the Series A Convertible Preferred shall
have no voting rights.
Section 6. Conversion.
----------
6A. Conversion Rights and Procedures: Conversion Price.
--------------------------------------------------
(i) At any time and from time to time, any holder of Series A
Convertible Preferred may convert at its sole option all or any portion of the
Series A Convertible Preferred (including any fraction of a Share) held by such
holder into a number of shares of Conversion Stock computed by multiplying the
number of Shares to be converted by $15.00 and dividing the result by the
Conversion Price then in effect.
(ii) Except as otherwise provided herein, each conversion of Series
A Convertible Preferred shall be deemed to have been effected as of the close of
business on the date on which the certificate or certificates representing the
Series A Convertible Preferred to be converted have been surrendered for
conversion at the principal office of the Corporation (the "Conversion Date").
---------------
At the time any such conversion has been effected, the rights of the holder of
the Shares converted as a holder of Series A Convertible Preferred shall cease
and the Person or Persons in whose name or names any certificate or certificates
for shares of Conversion Stock are to be issued upon such conversion shall be
deemed to have become the holder or holders of record of the shares of
Conversion Stock represented thereby.
(iii) The conversion rights of any Share shall terminate on the
Redemption Date for such Share unless the Corporation has failed to pay to the
holder thereof the Redemption Price in accordance with Section 4A.
----------
(iv) Notwithstanding any other provision contained herein, if a
conversion of Series A Convertible Preferred is to be made in connection with a
Change in Ownership, a Fundamental Change or other transaction affecting the
Corporation, the conversion of any Share of Series A Convertible Preferred may,
at the election of the holder thereof, be conditioned upon the consummation of
such transaction, in which case such conversion shall not be deemed to be
effective until such transaction has been consummated.
<PAGE>
(v) As soon as possible after a conversion has been effected (but
in any event within ten business days in the case of subsection (a) below), the
--------------
Corporation shall deliver to the converting holder:
(a) a certificate or certificates representing the number of
shares of conversion Stock issuable by reason of such conversion in such
name or names and such denomination or denominations as the converting
holder has specified;
(b) payment in an amount equal to all dividends accrued in
accordance with Section 1 with respect to each Share converted which have
---------
not been paid prior thereto plus the amount payable with respect to
fractional shares of Conversion Stock in accordance with subsection (xi)
---------------
below; and
(c) a certificate representing any Shares of Series A
Convertible Preferred which were represented by the certificate or
certificates delivered to the Corporation in connection with such
conversion but which were not converted.
(vi) The Corporation shall declare the payment of all dividends
payable under subsection (v)(b) above. If the Corporation is not permitted
-----------------
under applicable law to pay any portion of the accrued and unpaid dividends on
the Series A Convertible Preferred being converted, then the Corporation shall
pay such dividends in cash to the converting holder as soon thereafter as funds
of the Corporation are legally available for such payment. At the request of any
such converting holder, the Corporation shall provide such holder with written
evidence of its obligation to such holder.
(vii) Any holders of Series A Convertible Preferred may elect at
their sole discretion to convert the cash dividends payable with respect to such
holder's Series A Convertible Preferred into an additional number of shares of
Conversion Stock determined by dividing the amount of the unpaid dividends to be
applied for such purpose by the Conversion Price then in effect with respect to
such Shares of Series A Convertible Preferred.
(viii) The issuance of certificates for shares of Conversion Stock
upon conversion of Series A Convertible Preferred shall be made without charge
to the holders of such Series A Convertible Preferred for any issuance tax in
respect thereof or other cost incurred by the Corporation in connection with
such conversion and the related issuance of shares of Conversion Stock. Upon
conversion of each Share of Series A Convertible Preferred, the Corporation
shall take all such actions as are necessary in order to insure that the
Conversion Stock issuable with respect to such conversion shall be validly
issued, fully paid and nonassessable, free and clear of all taxes, liens,
charges and encumbrances with respect to the issuance thereof.
(ix) The Corporation shall not close its books against the transfer
of Series A Convertible Preferred or of Conversion Stock issued or issuable upon
conversion of Series A Convertible Preferred in any manner which interferes with
the timely conversion of the Series A Convertible Preferred. The Corporation
shall assist and cooperate with any holder of Shares required to make any
governmental filings or obtain any governmental approval prior to or in
connection with
<PAGE>
any conversion of Shares hereunder (including, without limitation, making any
filings required to be made by the Corporation).
(x) The Corporation shall at all times reserve and keep available
out of its authorized but unissued shares of Conversion Stock, solely for the
purpose of issuance upon the conversion of the Series A Convertible Preferred,
such number of shares of Conversion Stock issuable upon the conversion of all
outstanding Series A Convertible Preferred. All shares of Conversion Stock which
are so issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The Corporation shall
take all such actions as may be necessary to assure that all such shares of
Conversion Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Conversion Stock may be listed (except for official notice
of issuance which shall be immediately delivered by the Corporation upon each
such issuance). The Corporation shall not take any action which would cause the
number of authorized but unissued shares of Conversion Stock to be less than the
number of such shares required to be reserved hereunder for issuance upon
conversion of the Series A Convertible Preferred.
(xi) If any fractional interest in a share of Conversion Stock
would, except for the provisions of this Section 6A(xi), be delivered upon any
--------------
conversion of the Series A Convertible Preferred, the Corporation, in lieu of
delivering the fractional share therefor, shall pay an amount to the holder
thereof equal to the Market Price of such fractional interest as of the date of
conversion.
6B. Conversion Price.
----------------
(i) The initial Conversion Price of each Share of Series A
Convertible Preferred shall be $4.50. In order to prevent dilution of the
conversion rights granted under this Section 6, the Conversion Price shall be
---------
subject to adjustment from time to time pursuant to this Section 6B.
----------
(ii) If and whenever following the original date of issuance of the
Series A Convertible Preferred the Corporation issues or sells, or in accordance
with Section 6C is deemed to have issued or sold, any share of Common Stock or
----------
any warrants, options or other rights to purchase Common Stock (except as
provided by Section 6B(iii) below) for (x) consideration per share less than the
---------------
Conversion Price in effect immediately prior to such time or (y) consideration
per share less than the Market Price of the Common Stock as of the date of
issuance, then immediately upon such issue or sale or deemed issue or sale the
Conversion Price shall be reduced to the Conversion Price determined by dividing
(a) the sum of (1) the product derived by multiplying the Conversion Price in
effect immediately prior to such issue or sale by the number of shares of Common
Stock Deemed Outstanding immediately prior to such issue or sale, plus (2) the
consideration, if any, received by the Corporation upon such issue or sale, by
(b) the number of shares of Common Stock Deemed Outstanding immediately after
such issue or sale.
(iii) Notwithstanding the foregoing, there shall be no adjustment to
the Conversion Price hereunder with respect to the granting of stock options to
employees, directors, consultants and vendors of the Corporation and its
Subsidiaries or the exercise thereof.
<PAGE>
6C. Effect on Conversion Price of Certain Events. For purposes of
--------------------------------------------
determining the adjusted Conversion Price under Section 6B, the following shall
----------
be applicable:
(i) Issuance of Rights or Options. If the Corporation in any manner
-----------------------------
grants or sells any Options and the price per share for which the Common Stock
is issuable upon the exercise of such Options, or upon conversion or exchange of
any Convertible Securities issuable upon exercise of such Options, is less than
(a) the Conversion Price in effect immediately prior to the time of the granting
or sale of such Options or (b) the Market Price of the Common Stock determined
as of such time, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable upon the exercise
of such Options shall be deemed to be outstanding and to have been issued and
sold by the Corporation at the time of the granting or sale of such Options for
such price per share. For purposes of this Section 6C(i), the "price per share
-------------
for which Common Stock is issuable" shall be determined by dividing (A) the
total amount, if any, received or receivable by the Corporation as consideration
for the granting or sale of such Options, plus the minimum aggregate amount of
additional consideration payable to the Corporation upon exercise of all such
Options, plus in the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the issuance or sale of such convertible
Securities and the conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the exercise of such Options or
upon the conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options. No further adjustment of the Conversion Price
shall be made when Convertible Securities are actually issued upon the exercise
of such Options or when Common Stock is actually issued upon the exercise of
such Options or the conversion or exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Corporation in any
----------------------------------
manner issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon conversion or exchange thereof is less than
(a) the Conversion Price in effect immediately prior to the time of such issue
or sale or (b) the Market Price of the Common Stock determined as of such time,
then the maximum number of shares of Common Stock issuable upon conversion or
exchange of such Convertible Securities shall be deemed to outstanding and to
have been issued and sold by the Corporation at the time of the issuance or sale
of such Convertible Securities for such price per share. For the purposes of
this Section 6C(ii), the "price per share for which Common Stock is issuable"
--------------
shall be determined by dividing (A) the total amount, if any, received or
receivable by the Corporation as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment of the Conversion Price shall be made when Common Stock is
actually issued upon the conversion or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustments of the Conversion Price had been
or are to be made pursuant to other provisions of this Section 6, no further
---------
adjustment of the Conversion Price shall be made by reason of such issue or
sale.
<PAGE>
(iii) Change in Option Price or Conversion Rate. If (a) the purchase
-----------------------------------------
price provided for in any Options, (b) the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities or (c) the
rate at which any Convertible Securities are convertible into or exchangeable
for Common Stock changes at any time, the Conversion Price in effect at the time
of such change shall be immediately adjusted to the Conversion Price which would
have been in effect at such time had such Options or Convertible Securities
still outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time initially
granted, issued or sold; provided that if such adjustment would result in an
increase of the Conversion Price then in effect, no such adjustment shall be
made. For purposes of this Section 6C, if the terms of any Option or
----------
Convertible Security which was outstanding as of the date of issuance of the
Series A Convertible Preferred are changed in the manner described in the
immediately preceding sentence, then such Option or Convertible Security and the
Common Stock deemed issuable upon exercise, conversion or exchange thereof shall
be deemed to have been issued as of the date of such change; provided that no
such change shall at any time cause the Conversion Price hereunder to be
increased.
(iv) Calculation of Consideration Received. If any Common Stock,
-------------------------------------
Options or Convertible Security is issued or sold or deemed to have been issued
or sold for cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor (net of discounts, commissions and
related expenses). If any Common Stock, Options or Convertible Security is
issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Corporation shall be the fair
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the
Corporation shall be the Market Price thereof as of the date of receipt. If any
Common Stock, Options or Convertible Security is issued to the owners of the
non-surviving entity in connection with any merger in which the Corporation is
the surviving corporation, the amount of consideration therefor shall be deemed
to be the fair value of such portion of the net assets and business of the non-
surviving entity as is attributable to such Common Stock, Options or Convertible
Security, as the case may be. The fair value of any consideration other than
cash and securities shall be determined jointly by the Corporation and the
holders of a majority of the outstanding Series A Convertible Preferred. If such
parties are unable to reach agreement within a reasonable period of time, the
fair value of such consideration shall be determined by an independent appraiser
experienced in valuing such type of consideration jointly selected by the
Corporation and the holders of a majority of the outstanding Series A
Convertible Preferred. The determination of such appraiser shall be final and
binding upon the parties, and the fees and expenses of such appraiser shall be
borne by the Corporation.
(v) Integrated Transactions. In case any Options are issued in
-----------------------
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
shall be deemed to have been issued for a consideration of $.01.
(vi) Treasury Shares. The number of shares of Common Stock
---------------
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation or any
<PAGE>
Subsidiary, and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock.
(vii) Record Date. If the Corporation takes a record of the holders
-----------
of Common Stock for the purpose of entitling them (a) the receive a dividend or
other distribution payable in Common Stock, Options or in Convertible Securities
or (b) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or upon the making of such other distribution or
the date of the granting of such right of subscription or purchase, as the case
may be.
6E. Limitation on Conversion Prior to Shareholder Approval
------------------------------------------------------
Effective Date. Notwithstanding the provisions of this Section 6, if on the
- -------------- ---------
Conversion Date applicable to any conversion, (A) the Common Stock is then
listed for trading on the NASDAQ National Market, the New York Stock Exchange,
the American Stock Exchange or The NASDAQ SmallCap Market, (B) the Conversion
Price then in effect is such that the aggregate number of shares of Conversion
Stock that would then be issuable upon conversion of all outstanding shares of
Series A Convertible Preferred, together with any shares of Conversion Stock
previously issued upon conversion of Series A Convertible Preferred plus the
Common Stock issuable upon conversion of all outstanding Convertible preferred,
together with any shares of Common Stock previously issued upon conversion of
the Convertible Preferred, would equal or exceed 20% of the number or shares of
Conversion Stock outstanding on the Original Issue Date (the "Issuable
--------
Maximum"), and (C) the Shareholder Approval Effective Date has not occurred,
- -------
then the Corporation shall issue to any holder so requesting conversion of the
Series A Convertible Preferred its pro rata portion of the Issuable Maximum in
the same ratio that the number of shares of Series A Convertible Preferred held
by any such holder bears to all shares of Series A Convertible Preferred then
outstanding; and, with respect to any shares of Conversion Stock that otherwise
would have been issuable to such holder in excess of the Issuable Maximum, the
Company shall, as promptly as possible from time to time after a written request
by the holder, issue shares of Conversion Stock at a Conversion Price equal to
the Per Share Market Value on the Trading Day immediately preceding the date of
issuance of each such Share of Series A Convertible Preferred held by such
holder as would cause the number of shares of Conversion Stock issuable upon
such conversion to exceed the Issuable Maximum.
6F. Subdivision or Combination of Common Stock. If the Corporation
------------------------------------------
at any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, and if the Corporation at any
time combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
6G. Reorganization, Reclassification, Consolidation, Merger or
----------------------------------------------------------
Sale. Any recapitalization, reorganization, reclassification, consolidation,
- ----
merger, sale of all or substantially all of the Corporation's assets or other
transaction, in each case which is effected in such a manner that the holders of
Common Stock are entitled to receive (either directly or upon subsequent
<PAGE>
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock, is referred to herein as an "Organic Change." Prior to the
--------------
consummation of any Organic Change, the Corporation shall make appropriate
provisions (in form and substance satisfactory to the holders of a majority of
the Series A Convertible Preferred then outstanding) to insure that the Series A
Convertible Preferred remains outstanding and each of the holders of Series A
Convertible Preferred shall thereafter have the right to acquire and receive, in
lieu of or in addition to (as the case may be) the shares of Conversion Stock
immediately theretofore acquirable and receivable upon the conversion of such
holder's Series A Convertible Preferred, such shares of stock, securities or
assets as such holder would have received in connection with such Organic Change
if such holder had converted its Series A Convertible Preferred immediately
prior to such Organic Change. In each such case, the Corporation shall also make
appropriate provisions (in form and substance satisfactory to the holders of a
majority of the Series A Convertible Preferred then outstanding) to insure that
the provisions of this Section 6 and Sections 7 and 8 shall thereafter be
--------- ---------- -
applicable to the Series A Convertible Preferred. The Corporation shall not
effect any such consolidation, merger or sale, unless prior to the consummation
thereof, the successor entity (if other than the Corporation) resulting from
consolidation or merger or the entity purchasing such assets assumes by written
instrument (in form and substance satisfactory to the holders of a majority of
the Series A Convertible Preferred then outstanding), the obligation to deliver
to each such holder such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such holder may be entitled to acquire.
6H. Certain Events. If any event occurs of the type contemplated by
--------------
the provisions of this Section 6 but not expressly provided for by such
---------
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features but excluding
such rights granted to employees, directors, consultants and vendors), then the
Corporation's Board of Directors shall make an appropriate adjustment in the
Conversion Price then in effect so as to protect the rights of the holders of
Series A Convertible Preferred; provided that no such adjustment shall increase
the Conversion Price as otherwise determined pursuant to this Section 6 or
---------
decrease the number or shares of Conversion Stock issuable upon conversion of
each Share of Series A Convertible Preferred.
6I. Notices.
-------
(i) Immediately upon any adjustment of the Conversion Price, the
Corporation shall give written notice thereof to all holders of Series A
Convertible Preferred, setting forth in reasonable detail and certifying the
calculation of such adjustment.
(ii) the Corporation shall give written notice to all holders of
Series A Convertible Preferred at least 20 days prior to the date on which the
Corporation closes its books or takes a record (a) with respect to any dividend
or distribution upon Common Stock, (b) with respect to any pro rata subscription
offer to holders of Common Stock or (c) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
<PAGE>
(iii) The Corporation shall also give written notice to the holders
of Series A Convertible Preferred at least 20 days prior to the date on which
any Organic Change shall take place.
Section 7. Liquidating Dividends.
---------------------
If the Corporation declares or pays a dividend upon the Common Stock
payable in a form other than in cash from earnings or earned surplus (determined
in accordance with generally accepted accounting principles, consistently
applied) except for a stock dividend payable in shares of Common Stock (a
"Liquidating Dividend"), then the Corporation shall pay to the holders of Series
--------------------
A Convertible Preferred at the time of payment thereof the Liquidating Dividends
which would have been paid on the shares of Conversion Stock had such Series A
Convertible Preferred been converted immediately prior to the date on which a
record is taken for such Liquidating Dividend, or, if no record is taken, the
date as of which the record holders of Common Stock entitled to such dividends
are to be determined.
Section 8. Purchase Rights.
---------------
If at any time the Corporation grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
"Purchase Rights"), then each holder of Series A Convertible Preferred shall be
---------------
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if such holder
had held the number of shares of Conversion Stock acquirable upon conversion of
such holder's Series A Convertible Preferred immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase rights,
or if no such record is taken, the date as of which the record holders of Common
Stock are to be determined for the grant, issue or sale of such Purchase Rights.
Section 9. Events of Noncompliance.
-----------------------
9A. Definition. An Event of Noncompliance shall have occurred if:
----------
(i) the Corporation fails to pay on when due the full amount of
dividends then accrued on the Series A Convertible Preferred, whether or not
such payment is legally permissible or is prohibited by any agreement to which
the Corporation is subject;
(ii) the Corporation fails to make any redemption payment with
respect to the Series A Convertible Preferred which it is required to make
hereunder, whether or not such payment is legally permissible or is prohibited
by any agreement to which the Corporation is subject;
(iii) the Corporation breaches or otherwise fails to perform or
observe any other material covenant or agreement set forth herein or in the
Purchase Agreement (including, without limitation Section 5.22 and 5.23 thereof)
------------ ----
or the Original Purchase Agreement;
<PAGE>
(iv) any representation or warranty contained in the Purchase
Agreement or the Original Purchase Agreement or required to be furnished to any
holder of Series A Convertible Preferred pursuant to the Purchase Agreement or
the Original Purchase Agreement, or any information contained in writing
required to be furnished by the Corporation or any Subsidiary to any holder of
Series A Convertible Preferred, is false or misleading in any material respect
on the date made or furnished;
(v) the Corporation or any material Subsidiary makes an assignment
for the benefit of creditors; or an order, judgment or decree is entered
adjudicating the Corporation or any material Subsidiary bankrupt or insolvent;
or any order for relief with respect to the Corporation or any material
Subsidiary is entered under the Federal Bankruptcy Code; or the Corporation or
any material Subsidiary petitions or applies to any tribunal for the appointment
of a custodian, trustee, receiver or liquidator of the Corporation or any
material Subsidiary or of any substantial part of the assets of the Corporation
or any material Subsidiary, or commences any proceeding (other than a proceeding
for the voluntary liquidation and dissolution of a Subsidiary) relating to the
Corporation or any material Subsidiary under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against the Corporation or any material Subsidiary and
either (a) the Corporation or any such Subsidiary by any act indicates its
approval thereof, consent thereto or acquiescence therein or (b) such petition,
application or proceeding is not dismissed within 60 days;
(vi) a judgment in excess of $150,000 is rendered against the
Corporation or any material Subsidiary and, within 60 days after entry thereof,
such judgment is not discharged or execution thereof stayed pending appeal, or
within 60 days after the expiration of any such stay, such judgment is not
discharged;
(vii) the Corporation or any material Subsidiary defaults in the
performance of any obligation or agreement if the effect of such default is to
cause an amount exceeding $50,000 to become due prior to its stated maturity or
to permit the holder or holders of any obligation to cause an amount exceeding
$50,000 to become due prior to its stated maturity;
(viii) the Shareholder Approval Effective Date does not occur for any
reason on or prior to February 28, 2000; or
(ix) if all outstanding shares of Convertible Preferred have not be
reclassified into Series A Convertible Preferred on or before October 15, 1999
(subsections 9A (viii) and (ix) are each referred to as a "Special Event of
----------------
Noncompliance").
- -------------
9B. Consequences of Events of Noncompliance.
---------------------------------------
(i) Immediately upon the occurrence of an Event of Noncompliance
(including, without limitation, a Special Event of Noncompliance) has occurred,
and for 90 days thereafter that such Event of Noncompliance is continuing, the
dividend rate on the Series A Convertible Preferred
<PAGE>
shall increase immediately by an increment of one percentage point. Thereafter,
until such time as no Event of Noncompliance exists, the dividend rate shall
increase automatically at the end of each succeeding 90-day period by an
additional increment of one percentage points up the maximum rate permitted by
applicable law; provided that in no event shall the dividend rate be increased
pursuant to this sentence by more than five percentage points if such Event of
Noncompliance is not curable under any circumstances. Any increase of the
dividend rate resulting from the operation of this subparagraph shall terminate
as of the close of business on the date on which no Event of Noncompliance
exists and the dividend rate shall return to the rate as determined according to
Section 1, subject to subsequent increases pursuant to this Section 9B.
- --------- ----------
(ii) If a Special Event of Noncompliance has occurred, the holder or
holders of a majority of the Series A Convertible Preferred then outstanding may
demand (by written notice delivered to the Corporation) immediate redemption of
all or any portion of the Series A Convertible Preferred then outstanding at a
price per Share equal to the greater of (a) the Liquidation Value thereof (plus
all accrued and unpaid dividends thereon) and (b) the Market Price of the
Conversion Stock issuable upon exercise of the Series A Convertible Preferred.
The Corporation shall redeem all Series A Convertible Preferred as to which
rights under this paragraph have been exercised within 15 days after receipt of
the initial demand for redemption.
(iii) If any Event of Noncompliance exists, each holder of Series A
Convertible Preferred shall also have any other rights which such holder is
entitled to under any contract or agreement at any time and any other rights
which such holder may have pursuant to applicable law.
Section 10. Registration of Transfer.
------------------------
The Corporation shall keep at its principal office a register for the
registration of Series A Convertible Preferred. Upon the surrender of any
certificate representing Series A Convertible Preferred at such place, the
Corporation shall, at the request of the record holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
Shares represented by the surrendered certificate. Each such new certificate
shall be registered in such name and shall represent such number of Shares as is
requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate, and dividends
shall accrue on the Series A Convertible Preferred represented by such new
certificate from the date to which dividends have been fully paid on such Series
A Convertible Preferred represented by the surrendered certificate.
Section 11. Replacement.
-----------
Upon receipt of evidence reasonably satisfactory to the Corporation (an
affidavit of the registered holder shall be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate evidencing Shares
of Series A Convertible Preferred, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement
<PAGE>
shall be satisfactory), or, in the case of any such mutilation upon surrender of
such certificate, the Corporation shall (at its expense) execute and deliver in
lieu of such certificate a new certificate of like kind representing the number
of Shares of such class represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate, and dividends shall accrue on the Series A Convertible Preferred
represented by such new certificate from the date to which dividends have been
fully paid on such lost, stolen, destroyed or mutilated certificate.
Section 12. Definitions.
-----------
"Change in Ownership" means any sale, transfer or issuance or series of
-------------------
sales, transfers and/or issuances of Common Stock by the Corporation or any
holders thereof which results in any Person or group of Persons (as the term
"group" is used under the Securities Exchange Act of 1934), other than the
holders of Common stock and the Series A Convertible Preferred as of the date of
the Purchase Agreement, owning more than 50% of the Common Stock outstanding at
the time of such sale, transfer or issuance or series of sales, transfers and/or
issuances.
"Common Stock" means, collectively, the Corporation's Common Stock, par
------------
value $0.005, and any capital stock, other than preferred stock of the
Corporation, of any class of the Corporation hereafter authorized which is not
limited to a fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in the distribution
of assets upon any liquidation, dissolution or winding up of the Corporation.
"Common Stock Deemed Outstanding" means, at any given time, the number of
-------------------------------
shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to Sections 6C(i) and
--------------
6C(ii) whether or not the Options or Convertible Securities are actually
- ------
exercisable at such time, but excluding any shares of Common Stock issuable upon
conversion of the Series A Convertible Preferred.
"Conversion Stock" means shares of the Corporation's Common Stock; provided
----------------
that if there is a change such that the securities issuable upon conversion of
the Series A Convertible Preferred are issued by an entity other than the
Corporation or there is a change in the type or class of securities so issuable,
then the term "Conversion Stock" shall mean one share of the security issuable
upon conversion of the Series A Convertible Preferred if such security is
issuable in shares, or shall mean the smallest unit in which such security is
issuable if such security is not issuable in shares.
"Convertible Securities" means any stock or securities directly or
----------------------
indirectly convertible into or exchangeable for Common Stock other than the
Series A Convertible Preferred.
"Fundamental Change" means (a) any sale or transfer of more than 50% of the
------------------
assets of the Corporation and its Subsidiaries on a consolidated basis (measured
either by book value in accordance with generally accepted accounting principles
consistently applied or by fair market value determined in the reasonable good
faith judgment of the Corporation's Board of Directors) in any transaction or
series of transactions (other than sales in the ordinary course of business) and
<PAGE>
(b) any merger or consolidation to which the Corporation is a party, except for
a merger in which the Corporation is the surviving corporation, the terms of the
Series A Convertible Preferred are not changed and the Series A Convertible
Preferred is not exchanged for cash, securities or other property, and after
giving effect to such merger, the holders of the Corporation's outstanding
capital stock possessing a majority of the voting power (under ordinary
circumstances) to elect a majority of the Corporation's Board of Directors
immediately prior to the merger shall continue to own the Corporation's
outstanding capital stock possessing the voting power (under ordinary
circumstances) to elect a majority of the Corporation's Board of Directors.
"Junior Securities" means any capital stock or other equity securities of
-----------------
the Corporation, except for the Series A Convertible Preferred and any
outstanding Senior Securities.
"Liquidation Value" of any Share as of an particular date shall be equal to
-----------------
$15.00, as adjusted for stock splits, stock dividends, recapitalizations and
other similar events.
"Market Price" of any security means the average of the closing prices of
------------
such security's sales on all securities exchanges on which such security may at
the time be listed, or, if there has been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor organization,
in each such case averaged over a period of 30 days ending on the Trading Day
prior to the day as of which "Market Price" is being determined and the 30
consecutive business days prior to such day. If at any time such security is not
listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the "Market Price" shall be the fair value thereof
determined jointly by the Corporation and the holders of a majority of the
Series A Convertible Preferred. If such parties are unable to reach agreement
within a reasonable period of time, such fair value shall be determined by an
independent appraiser experienced in valuing securities jointly selected by the
Corporation and the holders of a majority of the Series A Convertible Preferred.
The determination of such appraiser shall be final and binding upon the parties,
and the Corporation shall pay the fees and expenses of such appraiser.
"Options" means any rights, warrants or options to subscribe for or
-------
purchase Common Stock or Convertible Securities.
"Original Issue Date" shall mean the date of the first issuance of any
-------------------
shares of the Series A Convertible Preferred regardless of the number of
transfers of any particular shares of Series A Convertible Preferred and
regardless of the number of certificates which may be issued to evidence such
Series A Convertible Preferred.
"Original Purchase Agreement" means that certain purchase agreement dated
---------------------------
as of July 23, 1999 by and between the Company and U-C Holdings, L.L.C., a
Delaware limited liability company, as such agreement may from time to time be
amended in accordance with its terms.
<PAGE>
"Purchase Agreement" means that certain purchase agreement dated as of
------------------
August 31, 1999 by and between the Company and U-C Holdings, L.L.C., a Delaware
limited liability company, as such agreement may from time to time be amended in
accordance with its terms.
"Per Share Market Value" means on any particular date (a) the closing bid
----------------------
price per share of the Conversion Stock on such date on The NASDAQ SmallCap
Market, the NASDAQ National Market or other registered national stock exchange
on which the Conversion Stock is then listed or if there is no such price on
such date, then the closing bid price on such exchange or quotation system on
the date nearest preceding such date, or (b) if the Conversion Stock is not
listed then on The NASDAQ SmallCap Market, the NASDAQ National Market or any
registered national stock exchange, the closing bid price for a share of
Conversion Stock in the over-the-counter market, as reported by NASDAQ or in the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (c) if the Conversion Stock is not then reported by the National
Quotation Bureau Incorporated (or similar organization or agency succeeding to
its functions of reporting prices), then the average of the "Pink Sheet" quotes
for the relevant conversion period, as determined in good faith by the holder.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, a limited liability, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision thereof.
"Redemption Date" as to any Share means the applicable date specified
---------------
herein; provided that no such date shall be a Redemption Date unless the
redemption consideration determined in accordance with Section 4A is actually
----------
paid in full on such date, and if not so paid in full, the Redemption Date shall
be the date on which such amount is fully paid.
"Senior Securities" means the 309,998 shares of Convertible Preferred Stock
-----------------
of the Company, $.001 par value (the "Convertible Preferred"), or such lesser
---------------------
amount as may be outstanding at any time, plus any other shares or preferred
stock hereafter authorized which have been approved by the holders of a majority
of the outstanding shares of Convertible Preferred.
"Shareholder Approval Effective Date" means either (a) the date of the
-----------------------------------
approval by a majority of the total votes cast on the proposal, in person or by
proxy, at a meeting of the shareholders of the Corporation held in accordance
with the Corporation's Certificate of Incorporation and bylaws, of the issuance
by the Corporation of shares of Conversion Stock exceeding the Issuable Maximum
as a consequence of the conversion of Series A convertible Preferred into
Conversion Stock at a price less than the greater of the book or market value on
the Original Issue Date as and to the extent required pursuant to Rule 4460(i)
of the NASDAQ Stock Market, Inc.'s Marketplace Rules (or any successor or
replacement provision thereof) ("Shareholder Approval") or (b) 20 business days
--------------------
after the mailing of an information statement on Schedule 14C under the Exchange
Act reflecting such Shareholder Approval having been obtained by written consent
in accordance with the Corporation's Certificate of Incorporation, bylaws and
applicable law.
<PAGE>
"Subsidiary" means, with respect to any Person, any corporation, limited
----------
liability company, partnership, association or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control the managing general partner of such limited liability
company, partnership, association or other business entity.
"Trading Day" means (a) a day on which the Conversion Stock is traded on
-----------
The NASDAQ SmallCap Market, the NASDAQ National Market or other registered
national stock exchange on which the Conversion Stock has been listed, or (b) if
the Conversion Stock is not listed on The NASDAQ SmallCap Market, the NASDAQ
National Market or any registered national stock exchange, a day on which the
Conversion Stock is traded in the over-the-counter market, as reported by the
OTC Bulletin Board, or (c) if the Conversion Stock is not quoted on the OTC
Bulletin Board, a day on which the Conversion Stock is quoted in the over-the-
counter market as reported by the National Quotation Bureau Incorporated (or
similar organization or agency succeeding its functions of reporting policies).
Section 13. Amendment and Waiver.
--------------------
No amendment, modification or waiver shall be binding or effective with
respect to any provision of Sections 1 to 14 without the prior written consent
---------- --
of the holders of a majority of the Series A Convertible Preferred outstanding
at the time such action is taken; provided further that no change in the terms
contained herein may be accomplished by merger or consolidation of the
Corporation with another corporation or entity unless the Corporation has
obtained the prior written consent of the holders of the majority of the Series
A Convertible Preferred then outstanding.
Section 14. Notices.
-------
Except as otherwise expressly provided hereunder, all notices referred
herein shall be in writing and shall be delivered by registered or certified
mail, return receipt requested and postage prepaid, or by reputable overnight
courier service, charges prepaid, and shall be deemed to have been given when so
mailed or sent (i) to the Corporation, at its principal executive offices and
(ii) to any stockholder, at such holder's address as it appears in the stock
records of the Corporation (unless otherwise indicated by any such holder).
<PAGE>
IN WITNESS WHEREOF, College Television Network, Inc., has caused this
Second Certificate to be executed by its duly authorized representative as of
August 30, 1999.
COLLEGE TELEVISION NETWORK, INC.,
a Delaware corporation
By: /s/ Martin Grant
----------------------------------
Martin Grant, President
<PAGE>
Texada Capital Corporation
================================================================================
1035 General Lafayette Blvd., Suite A
West Chester, PA 19382-8084
Telephone: (610) 793-4670
Facsimile: (610) 793-4671
August 31, 1999
Special Finance Committee of the Board of Directors
College Television Network, Inc.
5784 Lake Forest Drive, Suite 275
Atlanta, GA 30328
Dear Members of the Special Finance Committee of the Board of Directors:
You have requested the opinion of Texada Capital Corporation ("TCC") as to
the fairness, from a financial point of view, as of the date hereof, to the
shareholders of College Television Network, Inc. (the "Company" or "CTN"),
excluding U-C Holdings, L. L. C., of certain consideration to be received by the
Company pursuant to the terms of the Purchase Agreement by and between CTN and
U-C Holdings, L. L. C. (" Holdings"), dated as of August 31, 1999 (the "Purchase
Agreement"). Pursuant to the Purchase Agreement, as of August 31, 1999, the
Company will issue and sell 1,000,000 shares of $.001 par value convertible
preferred stock (the "Series A Preferred") to Holdings for an aggregate purchase
price of $15,000,000 (the "Initial Issuance"). Also, as of August 31, 1999, the
Company will enter into (i) a Plan of Reclassification (the "Reclassification
Plan") pursuant to which 309, 998 shares of convertible preferred stock (the
"Original Convertible Preferred") issued to Holdings pursuant to that certain
Purchase Agreement between CTN and Holdings, dated as of July 23, 1999 ( the
"Original Purchase Agreement"), will be reclassified as Series A Preferred,
subject to the effectiveness of a Schedule 14(c) information statement filing
under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"),
and (ii) a Cancellation Agreement, dated as of August 31, 1999, between the
Company and Holdings pursuant to which the Class D Warrant issued to Holdings in
connection with the Original Convertible Preferred will be canceled for no
consideration (the "Cancellation Agreement"). Simultaneously with the closing of
the Purchase Agreement, Armed Forces Communications, Inc. d/b/a Market Place
Media ("Armed Forces") and Canadian Imperial Bank of Commerce ("CIBC") will
enter into the Credit Agreement, dated as of August 31, 1999, pursuant to which
CIBC will arrange for certain term loans and revolving credit facilities for
Armed Forces, which, in the aggregate, total $17,000,000 (the "Credit
Facility").
<PAGE>
Special Finance Committee
College Television Network, Inc.
August 31, 1999
Page 2
Pursuant to a Guaranty Agreement, dated as of August 31, 1999, by and among
Willis Stein & Partners II, LP, Willis Stein & Partners Dutch, L.P. and their
affiliates (collectively, "Willis Stein") and CIBC, Willis Stein will guarantee
up to $6,000,000 of the obligations of Armed Forces under the Credit Facility.
(Willis Stein & Partners L. L. C. is the General Partner of Willis Stein &
Partners LP, the managing member of Holdings.) Together, proceeds from the
Initial Issuance of the Series A Preferred and $15,000,000 of the proceeds from
the Credit Facility, will be used by the Company to purchase the stock of Armed
Forces pursuant to the Stock Purchase Agreement, dated July 16, 1999, by and
among CTN, Armed Forces and Colleen Gordon and Kevin West (the "Armed Forces
Acquisition Agreement"). At the conclusion of the acquisition, Armed Forces will
be a subsidiary of the Company. The above series of transactions is collectively
referred to as the "Armed Forces Acquisition".
Texada Capital Corporation, as a customary part of its investment banking
business, is engaged regularly in the valuation of companies, assets and
securities in connection with mergers, acquisitions, private placements, ESOPs
and estate planning on behalf of shareholders, corporations and estates.
In arriving at our opinion, we have, among other things: (i) reviewed the
historical financial performance, current financial position and general
prospects of the Company, including its working capital position, current
financing options and cost of capital; (ii) reviewed certain current, publicly
available financial and other information concerning the Company; (iii) reviewed
the stock market performance and trading activity of the Company's stock; (iv)
studied and analyzed the consolidated financial and operating data of the
Company; (v) considered the terms and conditions of the Purchase Agreement and
the terms of the Series A Preferred; (vi) communicated with members of the
Special Finance Committee of the Board of Directors and certain members of the
Company's senior management to discuss the Company's operations, historical
financial statements, future prospects and alternative sources of capital; (vii)
compared certain financial and stock market information for the Company with
similar information for certain other comparable companies whose securities are
publicly traded; (viii) compared the financial terms, to the extent publicly
available, of acquisitions of certain companies to the valuation currently
attributed to the Company in the marketplace; (ix) compared the characteristics
of certain publicly traded convertible preferred stocks with the Series A
Preferred; and (x) conducted such other financial analyses and investigations as
we deemed appropriate.
Our financial analysis was based upon, but not limited to, a review of the
following documents and information examined during the course of our analysis:
(i) the Purchase Agreement, the Cancellation Agreement and the Reclassification
Plan; (ii) the Series A Convertible Preferred Stock Terms; (iii) other Company
SEC filings, including 10-KSBs, 10-QSBs, the 8-K dated August 3, 1999; (iv) the
Company's financial statements for the period ended June 30, 1999; (v) the
Company's projections, assuming the Armed Forces Acquisition takes place as of
August 31, 1999, for 1999 and 2000; (vi) a pro forma balance sheet reflecting
the Armed Forces Acquisition as of June 30, 1999; (vii) a Confidential
Information
<PAGE>
Special Finance Committee
College Television Network, Inc.
August 31, 1999
Page 3
Memorandum on Armed Forces d/b/a Market Place Media, dated March 29, 1999;
(viii) the Credit Facility; (ix) the Guaranty; (x) the Armed Forces Acquisition
Agreement; (x) the trading activity of the Company's stock; (xi) the Credit
Agreement between the Company and LaSalle Bank National Association, dated July
26, 1999 (the "LaSalle Agreement"); and (xii) the letter, dated March 1, 1999,
from Willis Stein & Partners, L. L. C. to PricewaterhouseCoopers, the Company's
auditors (the "Willis Stein Letter").
Our opinion is given in reliance upon information and representations made
or given by the Company and its officers, directors, auditors, counsel and other
agents, and on filings and other information provided by the Company including
financial statements, financial projections, and stock price data, as well as
certain industry and other information from recognized independent sources. With
respect to the financial forecasts and projections made available to us, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the preparers of such documents.
We express no opinion as to the reasonableness of such forecasts or projections
or the assumptions upon which they are based. We have not independently verified
any information, whether publicly available or furnished to us, concerning the
Company nor other data which we have considered in our review and, for purposes
of the opinion set forth below, we have assumed and relied upon the accuracy and
completeness of all such information and data. Additionally, we assume that the
Armed Forces Acquisition and the documents related thereto are, in all respects,
lawful under applicable law.
Of special relevance to our opinion is (i) the statement in Section 5.17 of
the Purchase Agreement which acknowledges that the Company has operated at a
loss and has had negative cash flow since October 31, 1998; (ii) the Willis
Stein Letter which agrees to infuse working capital into the Company to fund
cash flow deficits, if any, during 1999; (iii) the 1999 actual and projected
results for the Company by month which continue to show the need for infusions
of working capital, (iv) Section 11.2 of the LaSalle Agreement that requires a
cash equity infusion from Holdings of not less than $3,800,000, and a total cash
equity infusion of $5,000,000 from Holdings and the holders of certain warrants,
as a condition precedent to the making of working capital loans to the Company
under the LaSalle Agreement; (v) the 1999 projected results for the Company,
post the Armed Forces Acquisition, which show a draw down of substantially all
of the working capital line available to the Company pursuant to the LaSalle
Agreement; (vi) the provisions of the LaSalle Agreement which give LaSalle a
security interest in substantially all of the assets of the Company; (vii) the
provisions of the Guaranty which make it possible for Armed Forces to obtain
credit under the Credit Facility of the magnitude provided for therein; (viii)
provisions of the Credit Facility which give the lenders thereunder a security
interest in substantially all of the assets of Armed Forces; (ix) the intended
use of proceeds of the term loans under the Credit Facility and the Initial
Issuance of the Series A Preferred which provide no working capital to the
Company and are used to effect the Armed Forces Acquisition; (x) the year 2000
projected results for the Company which continue to show a need for substantial
working capital infusions, based on certain aggressive growth assumptions; (xi)
the provisions
<PAGE>
Special Finance Committee
College Television Network, Inc.
August 31, 1999
Page 4
of the Purchase Agreement which give the Company the option, under certain
circumstances, to have Holdings purchase additional shares of Series A
Preferred; and (xii) the Reclassification Plan which provides no additional
funds to the Company.
With regard to financial and other information relating to the general
prospects of the Company, we have assumed that such information has been
reasonably prepared on a basis that reflects the best currently available
estimates and judgments of the management of the Company with respect to its
most likely future performance.
Our opinion is necessarily based upon economic, financial, and other
conditions as they exist, and on the information made available to us, as of the
date of this letter. It should be understood that although subsequent events may
affect this opinion, we do not have any obligation to update, revise, or
reaffirm this opinion. We are expressing no opinion on (i) the Company's
solvency, (ii) the Company's ability to continue as a going concern, (iii) the
Company's prospects for future financings, cost reductions or other possible
transactions, (iv) the merits of the Armed Forces Acquisition, or (iv)
provisions of the bankruptcy laws in the event of the insolvency of any of the
Company or Armed Forces. We are expressing no opinion on the Company's ability
to achieve breakeven or better in its operations, nor are we expressing an
opinion as to the prices at which the common shares of the Company will actually
trade at any time. Finally, we are expressing no opinion with respect to the
issuance of any additional Series A Preferred pursuant to Article III of the
Purchase Agreement, other than issuance upon payment under the Guaranty by
Willis Stein.
Our opinion does not constitute a recommendation to the Board of Directors
of the Company and does not constitute a recommendation to any stockholder as to
how such stockholder should vote, to the extent that any vote is required, on
the issuance of the Series A Preferred, the reclassification of the Original
Convertible Preferred as Series A Preferred, or other aspects of the Armed
Forces Acquisition.
This letter is for the information of the Special Finance Committee of the
Company's Board of Directors only in their evaluation of (i) the Initial
Issuance of 1,000,000 shares of Series A Preferred, as of August 31, 1999, (ii)
-
the Reclassification Plan, and (iii) the issuance of additional Series A
Preferred upon payment under the Guaranty by Willis Stein, and may not be relied
upon by any other person. This letter is not to be quoted or referred to, in
whole or in part, in any registration statement, prospectus, or in any other
document used in connection with the offering or sale of securities, nor shall
this letter be used for any other purposes, without our prior written consent;
provided, however, that this opinion may be included in its entirety in an 8-K
filing with the SEC made by the Company with respect to the Armed Forces
Acquisition.
Based on the foregoing and such other factors as we deem relevant, it is
our opinion that, as of the date hereof, each of (i) the consideration to be
received by the Company for the Initial Issuance of the Series A Preferred,
issued on August 31, 1999, (ii) the Reclassification Plan,
<PAGE>
Special Finance Committee
College Television Network, Inc.
August 31, 1999
Page 5
dated as of August 31, 1999, and (iii) the consideration to be received by the
Company upon the issuance of additional Series A Preferred upon payment under
the Guaranty by Willis Stein, as set forth in Section 3.3(b) of the Purchase
Agreement, dated as of August 31, 1999, is fair, from a financial point of view,
to the stockholders of the Company, excluding Holdings.
Sincerely,
/s/ Texada Capital Corporation
------------------------------
Texada Capital Corporation
<PAGE>
EXECUTION COPY
--------------
CREDIT AGREEMENT
among
ARMED FORCES COMMUNICATIONS, INC.
The Several Lenders
from Time to Time Parties Hereto
and
CANADIAN IMPERIAL BANK OF COMMERCE
as Agent
Dated as of August 31, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1. DEFINITIONS................................................................. 1
1.1 Defined Terms.................................................................... 1
-------------
1.2 Other Definitional Provisions.................................................... 20
-----------------------------
ARTICLE 2. AMOUNT AND TERMS OF COMMITMENTS............................................. 21
2.1 Revolving Credit Commitments..................................................... 21
----------------------------
2.2 Revolving Credit Notes........................................................... 21
----------------------
2.3 Procedure for Revolving Credit Borrowing......................................... 21
----------------------------------------
2.4 Commitment Fees; Agent Fee....................................................... 22
--------------------------
2.5 Optional and Mandatory Termination or Reduction of Revolving Credit Commitments.. 22
-------------------------------------------------------------------------------
2.6 Term Loans....................................................................... 23
----------
2.7 Term Notes....................................................................... 23
----------
2.8 Procedures for Term Loan Borrowing............................................... 24
----------------------------------
2.9 Optional and Mandatory Prepayments............................................... 24
----------------------------------
2.10 Conversion and Continuation Options.............................................. 26
-----------------------------------
2.11 Maximum Amounts of Tranches...................................................... 27
---------------------------
2.12 Interest Rates; Default Rate Payment Dates....................................... 27
------------------------------------------
2.13 Computation of Interest and Fees................................................. 28
--------------------------------
2.14 Inability to Determine Interest Rate............................................. 28
------------------------------------
2.15 Pro Rata Treatment and Payments; Funding Reliance................................ 28
-------------------------------------------------
2.16 Illegality....................................................................... 29
----------
2.17 Requirements of Law.............................................................. 30
-------------------
2.18 Taxes............................................................................ 31
-----
2.19 Indemnity........................................................................ 33
---------
2.20 Discretion of Lender as to Manner of Funding..................................... 33
--------------------------------------------
ARTICLE 3. REPRESENTATIONS AND WARRANTIES.............................................. 34
3.1 Financial Condition.............................................................. 34
-------------------
3.2 No Change........................................................................ 35
---------
3.3 Corporate Existence; Compliance with Law......................................... 35
----------------------------------------
3.4 Corporate Power; Authorization; Enforceable Obligations.......................... 35
-------------------------------------------------------
3.5 No Legal Bar..................................................................... 36
------------
3.6 No Material Litigation........................................................... 36
----------------------
3.7 No Default....................................................................... 36
----------
3.8 Ownership of Property; Liens..................................................... 36
----------------------------
3.9 Intellectual Property............................................................ 36
---------------------
3.10 No Burdensome Restrictions....................................................... 36
--------------------------
3.11 Taxes............................................................................ 36
-----
3.12 Federal Regulations.............................................................. 37
-------------------
3.13 ERISA............................................................................ 37
-----
3.14 Holding Company; Investment Company Act; Other Regulations....................... 38
----------------------------------------------------------
3.15 Purpose of Loans................................................................. 38
----------------
3.16 Environmental Matters............................................................ 38
---------------------
3.17 Acquisitions..................................................................... 39
------------
3.18 Capitalization of Borrower....................................................... 39
--------------------------
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
3.19 Subsidiaries..................................................................... 39
------------
3.20 Insurance........................................................................ 40
---------
3.21 AF Acquisition Documents......................................................... 40
------------------------
3.22 Security Documents............................................................... 40
------------------
3.23 Accuracy and Completeness of Information......................................... 41
----------------------------------------
3.24 Labor Matters.................................................................... 41
-------------
3.25 Leaseholds, Permits, etc......................................................... 41
------------------------
3.26 Solvency......................................................................... 42
--------
3.27 Year 2000 Compliance............................................................. 42
--------------------
ARTICLE 4. CONDITIONS PRECEDENT........................................................ 42
4.1 Conditions to Initial Loans...................................................... 42
---------------------------
4.2 Conditions to Each Loan.......................................................... 47
-----------------------
ARTICLE 5. AFFIRMATIVE COVENANTS....................................................... 48
5.1 Financial Statements............................................................. 48
--------------------
5.2 Certificates; Other Information.................................................. 49
-------------------------------
5.3 Payment of Obligations........................................................... 50
----------------------
5.4 Maintenance of Existence......................................................... 50
------------------------
5.5 Maintenance of Property; Insurance............................................... 50
----------------------------------
5.6 Inspection of Property; Books and Records; Discussions........................... 51
------------------------------------------------------
5.7 Notices.......................................................................... 51
-------
5.8 Environmental Laws............................................................... 52
------------------
5.9 Interest Rate Protection......................................................... 52
------------------------
5.10 ERISA............................................................................ 52
-----
5.11 Tax-Sharing Agreement............................................................ 54
---------------------
5.12 Post-Closing Actions............................................................. 54
--------------------
5.13 Further Assurances............................................................... 54
------------------
ARTICLE 6. NEGATIVE COVENANTS.......................................................... 54
6.1 Financial Condition Covenants.................................................... 54
-----------------------------
6.2 Limitation on Indebtedness....................................................... 55
--------------------------
6.3 Limitation on Liens.............................................................. 56
-------------------
6.4 Limitation on Guarantee Obligations.............................................. 57
-----------------------------------
6.5 Limitation on Fundamental Changes................................................ 57
---------------------------------
6.6 Limitation on Sale of Assets..................................................... 57
----------------------------
6.7 Limitation on Dividends and other Restricted Payments............................ 58
-----------------------------------------------------
6.8 Limitation on Capital Expenditures............................................... 58
----------------------------------
6.9 Limitation on Investments, Loans and Advances.................................... 58
---------------------------------------------
6.10 Limitation on Transactions with Affiliates....................................... 59
------------------------------------------
6.11 Limitation on Sales and Leasebacks............................................... 59
----------------------------------
6.12 Limitation on Changes in Fiscal Year............................................. 59
------------------------------------
6.13 Limitation on Negative Pledge Clauses............................................ 59
-------------------------------------
6.14 Limitation on Lines of Business.................................................. 60
-------------------------------
6.15 New Subsidiaries................................................................. 60
----------------
6.16 Amendments to Material Agreements................................................ 60
---------------------------------
6.17 Management Fees.................................................................. 60
---------------
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
ARTICLE 7. EVENTS OF DEFAULT........................................................... 61
7.1................................................................................... 61
ARTICLE 8. THE ADMINISTRATIVE AGENT.................................................... 64
8.1 Appointment...................................................................... 64
-----------
8.2 Delegation of Duties............................................................. 64
--------------------
8.3 Exculpatory Provisions........................................................... 64
----------------------
8.4 Reliance by Agent................................................................ 64
-----------------
8.5 Notice of Default................................................................ 65
-----------------
8.6 Non-Reliance on Agent and Other Lenders.......................................... 65
---------------------------------------
8.7 Indemnification.................................................................. 66
---------------
8.8 Agent in Its Individual Capacity................................................. 66
--------------------------------
8.9 Successor Agent.................................................................. 66
---------------
ARTICLE 9. MISCELLANEOUS............................................................... 66
9.1 Amendments and Waivers........................................................... 66
----------------------
9.2 Notices.......................................................................... 67
-------
9.3 No Waiver; Cumulative Remedies................................................... 68
------------------------------
9.4 Survival of Representations and Warranties....................................... 68
------------------------------------------
9.5 Payment of Expenses and Taxes; Indemnification................................... 69
----------------------------------------------
9.6 Successors and Assigns; Participations and Assignments........................... 69
------------------------------------------------------
9.7 Adjustments; Setoff.............................................................. 71
-------------------
9.8 Limitation on Agreements......................................................... 72
------------------------
9.9 Effectiveness.................................................................... 72
-------------
9.10 Counterparts..................................................................... 73
------------
9.11 Severability..................................................................... 73
------------
9.12 Integration...................................................................... 73
-----------
9.13 Governing Law.................................................................... 73
-------------
9.14 Submission To Jurisdiction; Waivers.............................................. 73
-----------------------------------
9.15 Acknowledgments.................................................................. 74
---------------
9.16 Waivers of Jury Trial............................................................ 74
---------------------
</TABLE>
-iii-
<PAGE>
EXHIBITS
Exhibit A Form of Revolving Credit Note
Exhibit B Form of Term Note
Exhibit C Form of Notice of Borrowing
Exhibit D Form of Notice of Conversion
Exhibit E Form of Borrower Intellectual Property Security Agreement
Exhibit F Form of Borrower Security Agreement
Exhibit G-1 Form of CTN Guarantee
Exhibit G-2 Form of UC Holdings Guarantee
Exhibit H Form of WSP Guarantee
Exhibit I-1 Form of CTN Pledge Agreement
Exhibit I-2 Form of Pledge Agreement
Exhibit J-1 Form of Opinion of Counsel to Borrower
Exhibit J-2 Form of Opinion of Counsel to Parents
Exhibit J-3 Form of Opinion of Counsel to WSP II and WSP Dutch
Exhibit K Form of Closing Certificate
Exhibit L Form of Compliance Certificate
Exhibit M Subordination Terms
Exhibit N Form of Deed of Trust
Exhibit O Form of Commitment Transfer Supplement
SCHEDULES
Schedule I - Lenders and Lenders' Commitments
Schedule 3.1(c) - Guarantee Obligations and Dispositions of Property
Schedule 3.1(e) - Operating Forecast and Cash Flow Projections
Schedule 3.4 - Consents, Authorizations, Filings and Notices
Schedule 3.8 - Exceptions to Title
Schedule 3.13 - ERISA
Schedule 3.16 - Environmental Matters
Schedule 3.17 - Terms of AF Acquisition
Schedule 4.1(q) - Filings, Registrations and Recordings
Schedule 4.1(s) - Sources and Uses; Equity Investment
-iv-
<PAGE>
CREDIT AGREEMENT, dated as of August 31, 1999, among ARMED FORCES
COMMUNICATIONS, INC., a New York corporation doing business as Market Place
Media (the "Borrower"), the several banks and other financial institutions from
--------
time to time parties to this Agreement (the "Lenders"), CANADIAN IMPERIAL BANK
-------
OF COMMERCE, as administrative agent for the Lenders hereunder (in such
capacity, the "Agent"), and CIBC World Markets Corp., a New York corporation, as
-----
arranger (the "Arranger").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Borrower is engaged in the placement of advertising targeting
military personnel and their dependents, college students, minority and senior
citizens and providing other promotional activities focused on these markets;
WHEREAS, U-C Holdings, L.L.C., a Delaware limited liability company ("UC
--
Holdings") owns 80.3% of the issued and outstanding Capital Stock (as
- --------
hereinafter defined) of College Television Network, Inc., a Delaware corporation
("CTN"; together with UC Holdings, the "Parents");
--- -------
WHEREAS, CTN has entered into a Stock Purchase Agreement (the "AF
--
Acquisition Agreement"), dated as of July 16, 1999 among CTN, the Borrower,
- ---------------------
Colleen Gordon and Kevin West (together, the "Sellers"), pursuant to which CTN
-------
will acquire 100% of the issued and outstanding Capital Stock of the Borrower
(the "AF Acquisition");
--------------
WHEREAS, the Borrower desires that the Lenders provide (a) Term Loans (i)
to finance the AF Acquisition and (ii) to pay a portion of the transaction fees
and expenses in connection therewith, and (b) Revolving Credit Loans, (i) to
pay transaction fees and expenses in connection with the AF Acquisition, (ii)
for working capital and general corporate purposes and (iii) potential tax
liabilities in connection with the AF Acquisition in an amount to be paid by the
Borrower not to exceed $1,700,000 in the aggregate;
WHEREAS, the Lenders are willing to make such Loans to the Borrower subject
to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
-------------
have the following meanings:
<PAGE>
"Agent" shall have the meaning ascribed thereto in the heading hereto
-----
and shall include such other Lender or financial institution as shall have
subsequently been appointed as the successor Agent pursuant to Section 8.9.
-----------
"AF Acquisition" shall have the meaning ascribed thereto in the
--------------
recitals.
"AF Acquisition Agreement" shall have the meaning ascribed thereto in
------------------------
the recitals.
"AF Acquisition Documents" shall mean the collective reference to the
------------------------
AF Acquisition Agreement and each of the other agreements, notes,
guarantees, consents, instruments, certificates and opinions delivered by
CTN, the Borrower or any other Person in connection with the AF
Acquisition.
"Affiliate" shall mean, 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 shall mean the power, directly or indirectly, either
(a) to vote 10% or more of the securities having ordinary voting power for
the election of directors of such Person or (b) to direct or cause the
direction of the management and policies of such Person, whether by
contract or otherwise.
"Agreement" shall mean this Credit Agreement, as amended, supplemented
---------
or otherwise modified from time to time.
"Alternate Base Rate" shall mean, on any particular date, a rate of
-------------------
interest per annum equal to the higher of:
(a) the rate of interest most recently announced by CIBC-Bank at
its Domestic Lending Office as its prime rate (which rate is not
necessarily intended to be the lowest rate of interest charged by
CIBC-Bank in connection with extensions of credit); and
(b) the Federal Funds Rate for such date plus 0.50%.
"Alternate Base Rate Loans" shall mean Loans the rate of interest
-------------------------
applicable to which is based upon the Alternate Base Rate.
"Applicable Margin" shall mean for each Type of Loan, (a) until the
-----------------
delivery of a Compliance Certificate for the most recently completed fiscal
quarter, commencing with the fiscal quarter ending June 30, 2000, which
certificate demonstrates that the Leverage Ratio is less than 2.50 to 1.00,
2.00% for Alternate Base Rate Loans and 3.00% for Eurodollar Rate Loans;
and (b) thereafter, the rate per annum set forth under the relevant column
heading opposite the applicable Leverage Ratio:
<PAGE>
<TABLE>
<CAPTION>
Leverage Ratio Alternate Base Rate Loans Eurodollar Loans
<S> <C> <C>
Greater than or equal to 2.50 to 1.00 2.00% 3.00%
Less than 2.50 to 1.00 1.50% 2.50%
</TABLE>
The Leverage Ratio shall be determined on the basis of the most recent
Compliance Certificate delivered by the Borrower pursuant to Section
-------
5.2(c); provided that if the Borrower fails timely to deliver such
------ --------
certificate, without otherwise limiting the rights of the Lenders under
this Agreement, the Leverage Ratio shall be deemed to be greater than 2.50
to 1.00 until such time as such certificate is delivered. Any change in
the Applicable Margin as a result of a change in the Leverage Ratio shall
be effective as of the first day of the fiscal quarter immediately
succeeding the fiscal quarter to which such certificate setting forth such
change relates.
"Arranger" shall have the meaning ascribed thereto in the heading.
--------
"Assignee" shall have the meaning ascribed thereto in Section 9.6(c).
-------- --------------
"Availability Amount" shall mean, at any time, the aggregate amount of
-------------------
the Revolving Credit Commitments available to be drawn by the Borrower,
which amount shall be equal to $2,000,000, as such amount may be reduced in
accordance with the terms hereof.
"Available Revolving Credit Commitment" shall mean, as to any Lender
-------------------------------------
at any time, an amount equal to the excess, if any, of (a) the amount of
the lesser of (i) such Lender's Revolving Credit Commitment and (ii) such
Lender's Revolving Credit Commitment Percentage of the Availability Amount
over (b) the aggregate principal amount of all Revolving Credit Loans made
by such Lender then outstanding.
"Benefit Plan" shall mean a defined benefit plan as defined in Section
------------
3(35) of ERISA (other than a Multiemployer Plan) in respect of which the
Borrower or any Commonly Controlled Entity is an "employer" as defined in
Section 3(5) of ERISA.
"Borrower" shall have the meaning ascribed thereto in the heading
--------
hereto.
"Borrower Intellectual Property Security Agreement" shall mean the
-------------------------------------------------
Intellectual Property Security Agreement between the Borrower and the
Agent, for the benefit of the Lenders, substantially in the form of Exhibit
-------
E, as the same may be amended, supplemented or otherwise modified from time
-
to time.
"Borrower Security Agreement" shall mean the Security Agreement
---------------------------
between the Borrower and the Agent, for the benefit of the Lenders,
substantially in the form of Exhibit F, as the same may be amended,
---------
supplemented or otherwise modified from time to time.
<PAGE>
"Borrowing Date" shall mean any Business Day specified in a notice
--------------
pursuant to Section 2.3 or Section 2.8 as a date on which the Borrower
----------- -----------
requests that the Lenders make Loans hereunder.
"Business" shall have the meaning ascribed thereto in Section 3.16(b).
-------- ---------------
"Business Day" shall mean (a) 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 (b) with respect to the date of
(i) making or continuing any Loans as, or converting any Loans
from or into, Eurodollar Loans,
(ii) making any payment or prepayment or principal of or payment
of interest on any portion of the principal amount of any Loans being
maintained as Eurodollar Loans, or
(iii) the Borrower giving any notice (or the number of Business
Days to elapse prior to the effectiveness thereof) in connection with
any matter referred to in the immediately preceding clause (b)(i) or
(b)(ii),
any such day on which dealings in Dollars are also carried on in the
interbank market in London, England.
"Capital Expenditures" shall mean any expenditure in respect of the
--------------------
purchase or other acquisition of (including any expenditures under any
Financing Leases with respect to) fixed or capital assets of the Borrower
but shall exclude any such assets acquired in connection with normal
replacement and maintenance programs that, in accordance with GAAP, would
be properly charged to current operations.
"Capital Stock" shall mean any and all shares, interests,
-------------
participations or other equivalents (however designated) of capital stock
of a corporation, any and all equivalent ownership interests in a Person
(other than a corporation), including, without limitation, membership
interests in a limited liability company and limited partnership interests
in a limited partnership, and any and all warrants or options to purchase
any of the foregoing.
"Cash Equivalents" shall mean (a) securities issued or directly and
----------------
fully guaranteed or insured by the United States Government or any agency
or instrumentality thereof having maturities of not more than twelve months
from the date of acquisition, (b) securities issued or directly and fully
guaranteed or insured by any state of the United States of America or any
agency or instrumentality thereof having maturities of not more than twelve
months from the date of acquisition and, at the time of acquisition, having
the highest rating generally obtainable from either S&P or Moody's, (c)
time deposits and certificates of deposit of any Lender, or any domestic
commercial bank having capital
<PAGE>
and surplus in excess of $1,000,000,000, or of City Commerce Bank or Mid-
State Bankshares provided such bank shall have capital and surplus in
excess of $130,000,000, in each case, having maturities of not more than
twelve months from the date of acquisition, (d) repurchase obligations of
any Lender or of any domestic commercial bank satisfying the requirements
of clause (c) of this definition, with a term of not more than thirty days
for underlying securities issued or fully guaranteed or insured by the
United States government, (e) commercial paper of any issuer not an
Affiliate of the Parent or the Borrower rated at least A-2 or the
equivalent thereof by S&P or P-2 or the equivalent thereof by Moody's, or
carrying an equivalent rating by a nationally recognized rating agency, if
both S&P and Moody's cease publishing ratings of commercial paper issuers
generally, and maturing within 90 days from the date of acquisition, or (f)
shares of money market mutual or similar funds which invest exclusively in
assets satisfying the requirements of clauses (a) through (e) of this
definition.
"Change of Control" shall mean the occurrence of any of the following:
-----------------
(a) with respect to CTN and UC Holdings, the failure of WSP to
own directly or indirectly, free and clear of all Liens, at least 51%
of the Fully Diluted Outstanding Voting Securities of CTN and UC
Holdings;
(b) with respect to the Borrower, the failure of CTN, at all
times, to own directly or indirectly, through one or more wholly-owned
Subsidiaries, free and clear of all Liens (other than Liens in favor
of the Agent, for the benefit of the Lenders), 100% of the outstanding
Capital Stock of the Borrower except as may be permitted pursuant to
Section 6.6(g);
--------------
(c) WSP shall cease to have, directly or indirectly, the power
(whether or not exercised) to elect a majority of the board of
directors of any of the Borrower, CTN or UC Holdings, or any Person or
"group" (within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934) shall obtain, directly or indirectly,
such power;
(d) WSP shall sell, or agree to sell, greater than 10% of the
dollar value of its direct or indirect equity investment in UC
Holdings and CTN (measured as of the date hereof); or
(e) the Borrower shall be dissolved or liquidated.
"CIBC-Bank" shall mean Canadian Imperial Bank of Commerce, a Canadian
---------
chartered bank, or one or more of its agencies, branches or affiliates in
its or their respective capacity or capacities, as the case may be, as a
Lender or Lenders hereunder.
"Closing Date" shall mean the date on which the conditions precedent
------------
set forth in Section 4.1 shall be satisfied or waived.
-----------
<PAGE>
"Code" shall mean the Internal Revenue Code of 1986, as amended from
----
time to time.
"Collateral" shall mean (i) with respect to CTN, all the issued and
----------
outstanding Capital Stock of the Borrower, and (ii) with respect to the
Borrower, all assets of the Borrower, now owned or hereafter acquired, upon
which a Lien is purported to be created by any Security Document.
"Commitments" shall mean the collective reference to the Term Loan
-----------
Commitments and the Revolving Credit Commitments.
"Commitment Percentage" shall mean the collective reference to the
---------------------
Term Loan Commitment Percentage and the Revolving Credit Commitment
Percentage.
"Commitment Transfer Supplement" shall have the meaning ascribed
------------------------------
thereto in Section 9.6(c).
--------------
"Commonly Controlled Entity" shall mean an entity, whether or not
--------------------------
incorporated, which is under common control with a Borrower within the
meaning of Section 4001 of ERISA or is part of a group which includes such
Borrower and which is treated as a single employer under Section 414 of the
Code.
"Compliance Certificate" shall have the meaning ascribed thereto in
----------------------
Section 5.2(c).
--------------
"Contractual Obligation" shall mean any provision of any security
----------------------
issued by the Borrower or of any agreement, instrument or other undertaking
to which the Borrower is a party or by which it or any of its property is
bound.
"Corporate Guarantees" shall mean the collective reference to the
--------------------
Parent Guarantees and the WSP Guarantee.
"Corporate Guarantors" shall mean the collective reference to the
--------------------
Parents, WSP II and WSP Dutch.
"CTN" shall have the meaning ascribed thereto in the recitals.
---
"CTN Credit Agreement" shall mean the Credit Agreement, dated as of
--------------------
July 26, 1999 between CTN and LaSalle Bank, as the same may be amended or
provisions waived from time to time with the approval of the Agent;
provided that (i) the Agent shall be deemed to have approved any such
--------
amendment if LaSalle Bank shall have approved the same; and (ii) if LaSalle
Bank ceases at any time to be the Lender (as such term is defined in the
CTN Credit Agreement) thereunder, any successor Lender shall be subject to
the approval of the Agent in its reasonable judgment.
<PAGE>
"CTN Guarantee" shall mean the Guarantee, executed by CTN in favor of
-------------
the Agent, for the benefit of the Lenders, substantially in the form of
Exhibit G-1, as the same may be amended, supplemented or otherwise modified
-----------
from time to time.
"CTN Pledge Agreement" shall mean the Pledge Agreement of CTN in favor
--------------------
of the Agent, for the benefit of the Lenders, substantially in the form of
Exhibit I-1, as the same may be amended, supplemented or otherwise modified
-----------
from time to time.
"Default" shall mean any of the events specified in Section 7.1,
------- -----------
whether or not any requirement for the giving of notice, the lapse of time,
or both, or any other condition, has been satisfied.
"Dollars" and "$" shall mean dollars in lawful currency of the United
------- -
States of America.
"Domestic Lending Office" shall mean, initially, the office of each
-----------------------
Lender designated as such in Schedule I (or designated pursuant to a
Commitment Transfer Supplement), and thereafter, such other office of such
Lender, if any, which shall be making or maintaining Alternate Base Rate
Loans as may be designated from time to time by notice from such Lender to
the Borrower and the Agent.
"Environmental Laws" shall mean 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 public health, public
and workplace safety or protection of the environment, as now or may at any
time hereafter be in effect.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended from time to time.
"Eurodollar Base Rate" shall mean with respect to each day during each
--------------------
Interest Period pertaining to a Eurodollar Loan, the rate per annum
determined on the basis of the rate for deposits in Dollars for a period
equal to such Interest Period commencing on the first day of such Interest
Period and appearing on Page 3750 of the Telerate screen at or about 11:00
a.m., London time, two Business Days prior to the commencement of such
Interest Period or, if such rate does not appear on such page or otherwise
on such service, such rate shall be determined by reference to such other
publicly available service for displaying Eurodollar rates as may be agreed
between the Agent and the Borrower or, in the absence of such agreement,
the "Eurodollar Base Rate" shall be the rate of interest per annum equal to
the average (rounded upwards, if necessary, to the nearest 1/16 of 1%) of
the rates per annum at which Dollar deposits in immediately available funds
are offered by CIBC-Bank to prime international banks in the offshore
dollar market at or about 11:00 a.m., New York time, two Business Days
prior to the beginning of such Interest
<PAGE>
Period for delivery on the first day of such Interest Period, and in an
amount approximately equal to the amount of CIBC-Bank's Eurodollar Loan and
for a period approximately equal to such Interest Period.
"Eurodollar Loans" shall mean Loans the rate of interest applicable to
----------------
which is based upon the Eurodollar Rate.
"Eurodollar Office" shall mean, initially, the office of each Lender
-----------------
designated as such in Schedule I (or designated pursuant to a Commitment
Transfer Supplement), and thereafter, such other office of such Lender, if
any, which shall be making or maintaining Eurodollar Loans as may be
designated from time to time by notice from such Lender to the Borrower and
the Agent.
"Eurodollar Rate" shall mean 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 -Eurodollar Reserve Requirements
"Eurodollar Reserve Requirements" shall mean, for any day as applied
-------------------------------
to a Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on such
day (including, without limitation, basic, supplemental, marginal and
emergency reserves) under any regulations of the Board of Governors of the
Federal Reserve System 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 such Board) maintained by a member bank of such System.
"Event of Default" shall mean any of the events specified in Section
---------------- -------
7.1; provided that any requirement for the giving of notice, the lapse of
--- --------
time, or both, or any other condition, has been satisfied.
"Excess Cash Flow" shall mean with respect to any fiscal year,
----------------
Operating Cash Flow of the Borrower for such fiscal year, less the sum of
----
(i) Fixed Charges plus (ii) the increase if any (or minus the decrease if
---- -----
any) in Working Capital at the conclusion of such fiscal year over Working
Capital at the conclusion of the immediately preceding fiscal year plus
----
(iii) optional prepayments of principal of the Term Loans made in
connection with any optional permanent reductions of the Term Loan
Commitments during such period, plus (iv) optional prepayments of principal
----
of the Revolving Credit Loans made in connection with any optional
permanent reductions of the Revolving Credit Commitments during such
period.
<PAGE>
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
----
successor thereto.
"Federal Funds Rate" shall mean for any particular date, an interest
------------------
rate per annum equal to the interest rate offered in the interbank market
to the Agent as the overnight Federal Funds Rate at or about 10:00 a.m.,
New York City time, on such day (or, if such day is not a Business Day, on
the next preceding Business Day).
"Fee Letter" shall mean the letter dated as of the Closing Date,
----------
between the Borrower and the Agent, as the same may be amended,
supplemented or otherwise modified.
"Financing Lease" shall mean any lease of property, real or personal,
---------------
the obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of the lessee.
"Fixed Charges" shall mean, for the Borrower, with respect to any
-------------
period, the sum (without duplication) of (a) cash Interest Expense for such
period, (b) taxes paid in cash during such period, (c) Capital Expenditures
during such period, (d) regularly scheduled payments of principal of all
other Funded Debt of the Borrower during such period and (e) payments and
prepayments of principal of Revolving Credit Loans made in connection with
any mandatory permanent reductions of the Revolving Credit Commitments
during such period.
"Fixed Charge Ratio" shall mean, in respect of any period, the ratio
------------------
of (a) Operating Cash Flow for such period to (b) Fixed Charges for such
period.
"Fully Diluted Outstanding" shall mean with respect to the
-------------------------
determination of the number of Voting Securities outstanding on any date,
the sum of (a) all Voting Securities outstanding on such date and (b) all
Voting Securities that would be outstanding if all outstanding rights,
warrants or options that may be exercised, exchanged or converted into
Voting Securities were exercised, exchanged or converted on such date but
shall exclude any warrants or options held by any Lender or any affiliate
thereof.
"Funded Debt" shall mean, as of any date of determination, the sum of
-----------
all outstanding Indebtedness of the Borrower, other than Indebtedness of
the type described in clause (f) and clause (h) of the definition thereof.
"GAAP" shall mean generally accepted accounting principles in the
----
United States of America consistent with those utilized in preparing the
audited financial statements referred to in Section 5.1 except insofar as
-----------
(a) the Borrower shall have elected (which election shall not have been
required by the American Institute of Certified Public Accountants or any
similar body and shall continue to be effective for subsequent years) with
the concurrence of its independent public accountants, to adopt more
recently promulgated generally accepted accounting principles; and (b) the
Required Lenders shall
<PAGE>
have consented to such election (it being understood that such consent may
be conditioned upon negotiation of such changes to this Agreement,
including Section 6.1, as the Required Lenders may in their sole discretion
-----------
deem appropriate).
"Governmental Authority" shall mean any national government (United
----------------------
States or foreign), any state or other political subdivision thereof and
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guarantee Obligation" shall mean as to any Person (the "guaranteeing
-------------------- ------------
person"), any obligation of (a) the guaranteeing person or (b) another
------
Person (including, without limitation, any bank under any letter of credit)
to induce the creation of which the guaranteeing person has issued a
reimbursement, counter-indemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, lease, dividend or
other obligation (the "primary obligation") 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 (x) for the purchase or payment of any such primary
obligation or (y) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth, liquidity 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 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 the Borrower in
good faith.
"Hedging Agreements" shall mean (a) any interest rate protection
------------------
agreement, interest rate future, interest rate option, interest rate swap,
interest rate cap or other interest rate hedge or arrangement under which
the Borrower is a party or a beneficiary and (b) any other agreement or
arrangement designed to limit or eliminate the risk and/or exposure of the
Borrower to fluctuations in currency exchange rates.
"Indebtedness" of any Person at any date shall mean, (a) all
------------
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services
<PAGE>
(other than trade liabilities incurred in the ordinary course of business
and payable in accordance with customary practices and not outstanding more
than 90 days past the original date of invoice creating such trade
liabilities, except where the amount or validity thereof is currently being
contested in good faith by appropriate proceedings and reserves in
conformity with GAAP and reasonably acceptable to the Agent with respect
thereto have been provided on the books of such Person), (b) any other
indebtedness of such Person which is evidenced by a note, bond, debenture
or similar instrument, (c) all obligations of such Person under Financing
Leases, (d) all obligations of such Person in respect of outstanding
letters of credit, acceptances and similar obligations issued or created
for the account of such Person, (e) all liabilities secured by any Lien on
any property owned by such Person even though such Person has not assumed
or otherwise become liable for the payment thereof, (f) all liabilities
arising under Hedging Agreements (other than interest rate caps) of such
Person, (g) all Guarantee Obligations of such Person and (h) any asserted
withdrawal liability of such Person or a Commonly Controlled Entity to a
Plan.
"Insolvency" shall mean with respect to any Multiemployer Plan, the
----------
condition that such Plan is insolvent within the meaning of Section 4245 of
ERISA.
"Insolvent" shall mean pertaining to a condition of Insolvency.
---------
"Intellectual Property" shall have the meaning ascribed thereto in
---------------------
Section 3.9.
-----------
"Interest Coverage Ratio" shall mean, for any period, the ratio of (a)
-----------------------
Operating Cash Flow for such period to (b) cash Interest Expense for such
period; provided that the Interest Coverage Ratio for the first three full
--------
fiscal quarters following the Closing Date shall be the ratio of (i) the
Operating Cash Flow for the immediately preceding four fiscal quarters
ending with the most recently completed fiscal quarter to (x) for the
fiscal quarter ending as of December 31, 1999, cash Interest Expense for
such fiscal quarter multiplied by four; (y) for the fiscal quarter ending
-------------
as of March 31, 2000, cash Interest Expense for such fiscal quarter
multiplied by two; and (z) for the fiscal quarter ending as of June 30,
-------------
2000, cash Interest Expense for such fiscal quarter multiplied by four-
-------------
thirds.
"Interest Expense" shall mean, for any period, the sum of (a) all
----------------
interest in respect of all Funded Debt of the Borrower accrued or
capitalized during such period (whether or not actually paid during such
period), plus (b) the net amounts payable (or minus the net amounts
----
receivable) under Hedging Agreements accrued during such period, plus (c)
----
all financing or commitment fees in respect of Indebtedness of the Borrower
accrued or capitalized during such period (whether or not actually paid
during such period) but shall exclude (i) any arrangement or financing fees
paid in connection with the AF Acquisition to the extent expensed, and (ii)
any transaction or "up front" fees incurred in establishing or entering
into any such Hedging Agreement.
"Interest Payment Date" shall mean (a) as to any Alternate Base Rate
---------------------
Loan, the last day of each March, June, September and December to occur
while such Loan is
<PAGE>
outstanding, (b) as to any Eurodollar Loan having an Interest Period of
three months or less, the last day of such Interest Period, and (c) as to
any Eurodollar Loan having an Interest Period longer than three months,
each day which is three months, or a whole multiple thereof, after the
first day of such Interest Period and the last day of such Interest Period.
"Interest Period" with respect to any Eurodollar Loan shall mean:
---------------
(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 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
Borrower by irrevocable notice to the Agent not less than three
Business Days prior to the last day of the then current Interest
Period with respect thereto;
provided that, the foregoing provisions relating to Interest Periods are
--------
subject to the following:
(i) if any Interest Period pertaining to a Eurodollar Loan
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
Revolving Credit Commitment Termination Date, in the case of the
Revolving Credit Loans, or beyond the date final payment is due on the
Term Loans, in the case of the Term Loans, shall end on the Revolving
Credit Commitment Termination Date or such date of final payment, as
the case may be;
(iii) any Interest Period pertaining to a Eurodollar Loan 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 Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an
Interest Period for such Loan.
"LaSalle Bank" shall mean LaSalle Bank National Association.
------------
<PAGE>
"Lenders" shall have the meaning ascribed thereto in the heading
-------
hereto.
"Leverage Ratio" shall mean, as of any date of determination, the
--------------
ratio of (a) Funded Debt on such date to (b) Operating Cash Flow for the
four fiscal quarters then most recently ended.
"Lien" shall mean (a) 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 Financing Lease having substantially the same
economic effect as any of the foregoing and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction), (b) any arrangement or agreement which prohibits the
Borrower from creating any mortgage, pledge, hypothecation, deposit
arrangement, encumbrance, lien, charge or other security interest, or from
entering into any agreement or arrangement described in clause (a) of this
definition or (c) the sale, assignment, pledge or transfer for security of
any accounts, general intangibles or chattel paper of the Borrower with or
without recourse.
"Loan" shall mean any loan made by any Lender pursuant to this
----
Agreement.
"Loan Documents" shall mean this Agreement and each other agreement,
--------------
instrument or certificate executed and delivered to the Agent or any Lender
pursuant hereto including, without limitation, the Notes, the Corporate
Guarantees, the Security Documents and the Fee Letter.
"Loan Parties" shall mean each Parent, the Borrower, WSP II, WSP Dutch
------------
and any other Person (other than the Agent or any of the Lenders) which is
or becomes a party to a Loan Document.
"Management Agreement" shall mean the Management Agreement, dated as
--------------------
of the Closing Date, between the Borrower and CTN.
"Material Adverse Effect" shall mean a material adverse effect on (a)
-----------------------
the business, operations, property, condition (financial or otherwise) or
prospects of any of the Borrower, or (b) the validity or enforceability of
this Agreement, any of the Notes or any of the other Loan Documents, the
Liens created hereunder or thereunder or the rights or remedies of the
Agent or the Lenders hereunder or thereunder.
"Material Agreement" shall mean each contract or agreement to which
------------------
the Borrower is a party or by which the Borrower is bound and which
requires annual payments in excess of $100,000 (excluding any employment
contracts between the Borrower and its employees).
<PAGE>
"Materials of Environmental Concern" shall mean 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.
"Moody's" shall mean Moody's Investors Service, Inc.
-------
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan
------------------
as defined in Section 4001(a)(3) of ERISA.
"Net Disposition Proceeds" shall mean the gross cash proceeds
------------------------
(including any cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise but only as and when
received) received by the Borrower from the sale, lease (other than a lease
in the ordinary course of business), transfer or other disposition of any
of its assets (other than any of the foregoing permitted under Section
-------
6.6(a) and 6.6(b) or sales of advertising or services in the ordinary
-----------------
course of business) less the sum of (a) attorneys' fees, accountants' fees,
investment banking fees and other customary fees and expenses actually
incurred and paid to non-affiliated third parties in connection therewith,
(b) any Indebtedness secured by a Lien on such asset or property permitted
under clause (e) of Section 6.3, (c) any sales taxes applicable thereto and
-----------
(d) income taxes reasonably estimated to be actually payable by the
Borrower with respect to any gain realized as a result of such sale, lease,
transfer or other disposition and which taxes are payable by the Borrower
within two years of the date of such sale, lease, transfer or other
disposition or within two years of any installment payment with respect
thereto.
"Net Disposition Proceeds Notice" shall have the meaning ascribed
-------------------------------
thereto in Section 2.9(c).
--------------
"Net Income" for any period shall mean, net income (or deficit) of the
----------
Borrower for such period determined in accordance with GAAP.
"Net Insurance Proceeds" shall mean (a) the proceeds (including any
----------------------
proceeds from the termination or unwinding of any interest rate cap) and
awards of compensation received by the Borrower of the Borrower from (i)
the damage to or destruction or condemnation of all or any portion of its
assets or property (regardless of whether such compensation is from any
action in tort or contract or otherwise or from any governmental proceeding
or action) or (ii) indemnity payments to the Borrower under the AF
Acquisition Documents less, in each case, the sum of any costs of
collection that are paid to non-affiliated third parties, and less, in each
case, any attorneys' fees and accountants' fees and amounts required to be
applied to the prepayment of Indebtedness secured by a Lien expressly
permitted hereunder or any asset which is the subject of such damage or
condemnation and, with respect to any indemnity payments under clause (ii),
any out-of-pocket costs incurred by the Borrower for which such
indemnification is being
<PAGE>
provided and any portion of such indemnity payments that is actually
applied by the Borrower to repair or replace any asset or correct or
remediate any condition in respect of which such indemnity payment is made
and (b) any amounts received by the Borrower as a result or in respect of
the overfunding of a Plan.
"Non-Excluded Taxes" shall have the meaning ascribed thereto in
------------------
Section 2.18.
------------
"Notes" shall mean the collective reference to the Revolving Credit
-----
Notes and the Term Notes.
"Notice of Borrowing" shall have the meaning ascribed thereto in
-------------------
Section 2.3.
-----------
"Obligations" shall mean the unpaid principal of and interest on
-----------
(including, without limitation, interest accruing after the maturity of the
Loans and interest accruing after the filing of any petition in bankruptcy,
or the commencement of any insolvency, reorganization or like proceeding,
relating to the Borrower, whether or not a claim for post-filing or post-
petition interest is allowed in such proceeding and whether the Agent, for
the benefit of the Lenders, is oversecured or undersecured with respect to
such Loans) the Notes and all other obligations and liabilities of the
Borrower to the Agent and the Lenders, whether direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit Agreement,
the Notes, the other Loan Documents or any Hedging Agreement with the Agent
or any Lender or any other document made, delivered or given in connection
therewith or herewith, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses (including,
without limitation, all fees and disbursements of counsel to the Agent or
to the Lenders that are required to be paid by the Borrower pursuant to the
terms of the Credit Agreement, any other Loan Document or any Hedging
Agreement with any Lender) or otherwise.
"Operating Cash Flow" shall mean, for any period of determination, an
-------------------
amount equal to the sum of (without duplication) (a) Net Income for such
period, after deduction of (i) all items which should be classified as
extraordinary, all determined in accordance with GAAP; (ii) all insurance
and condemnation proceeds received during such period to the extent, if
any, included in Net Income and (iii) tax adjusted gains (or inclusion of
tax adjusted losses) incurred in connection with the disposition of capital
assets, plus (b) all amounts deducted in computing such Net Income in
----
respect of (i) Interest Expense (after giving effect to all Hedging
Agreements and payments and receipts thereunder), (ii) non-cash
amortization expense (including, without limitation, amortization of
financing costs, noncurrent assets and non-cash charges), (iii)
depreciation, (iv) income taxes, (v) all other non-cash expenses, (vi)
closing costs actually incurred in connection with the AF Acquisition and
paid to non-affiliated third parties, to the extent expensed.
"Parent Guarantees" shall mean the collective reference to the CTN
-----------------
Guarantee and the UC Holdings Guarantee.
<PAGE>
"Parents" shall have the meaning ascribed thereto in the heading
-------
hereto.
"Participant" shall have the meaning ascribed thereto in Section
----------- -------
9.6(b).
------
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA or any successor thereto.
"Permitted Assets" shall have the meaning ascribed thereto in Section
---------------- -------
2.9(c).
------
"Person" shall mean 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" shall mean at a particular time, any employee benefit plan
----
which is covered by ERISA and in respect of which the Borrower is an
"employer" as defined in Section 3(5) of ERISA.
"Pledge Agreement" shall mean the Pledge Agreement of any Person who
----------------
acquires Capital Stock of the Borrower in favor of the Agent, for the
benefit of the Lenders, substantially in the form of Exhibit I-2, as the
-----------
same may be amended, supplemented or otherwise modified from time to time.
"Pledged Stock" shall have the meaning ascribed thereto in the CTN
-------------
Pledge Agreement.
"Pro Forma Balance Sheet" shall have the meaning ascribed thereto in
-----------------------
Section 3.1(b).
--------------
"Properties" shall have the meaning ascribed thereto in Section
---------- -------
3.16(a).
-------
"QFL Note" shall have the meaning ascribed thereto in Section 2.18(c).
-------- ---------------
"Qualified Foreign Lender" shall have the meaning ascribed thereto in
------------------------
Section 2.18(c).
---------------
"Register" shall have the meaning ascribed thereto in Section 9.6(d).
-------- --------------
"Regulation U" shall mean Regulation U of the Board of Governors of
------------
the Federal Reserve System as in effect from time to time.
"Reorganization" shall mean with respect to any Multiemployer Plan,
--------------
the condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Replaced Note" shall have the meaning ascribed thereto in Section
------------- -------
2.18(c).
-------
<PAGE>
"Reportable Event" shall mean any of the events set forth in section
----------------
4043(c) of ERISA other than those events for which the notice requirement
has been waived under applicable regulations.
"Required Lenders" shall mean Lenders whose Commitment Percentages
----------------
aggregate at least 51%; provided that so long as there are no more than two
--------
Lenders at any time, Required Lenders shall mean, at such time, Lenders
whose Commitment Percentages aggregate 100%.
"Requirement of Law" as to any Person shall mean the articles of
------------------
organization and by-laws, operating agreement or partnership agreement 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" shall mean the chairman of the board of
-------------------
directors, the chief executive officer or the president (or manager or
general partner, in the case of a limited liability company or limited
partnership, respectively) of such Person or, with respect to financial
matters, the chief financial officer of such Person, in each case, in his
or her capacity as such.
"Revolving Credit Commitment" shall mean, as to any Lender, the
---------------------------
obligation of such Lender to make Revolving Credit Loans to the Borrower in
an aggregate principal amount at any one time outstanding not to exceed the
amount set forth under the heading "Revolving Credit Commitments" opposite
such Lender's name on Schedule I, as such amount may be reduced from time
to time pursuant to this Agreement. At the date of this Agreement, the
aggregate amount of the Revolving Credit Commitments is equal to
$2,000,000.
"Revolving Credit Commitment Percentage" shall mean, as to any Lender,
--------------------------------------
at any time, the percentage which such Lender's Revolving Credit Commitment
then constitutes of the aggregate Revolving Credit Commitments.
"Revolving Credit Commitment Period" shall mean the period from and
----------------------------------
including the date hereof to, but not including, the Revolving Credit
Commitment Termination Date or such earlier date on which the Revolving
Credit Commitments shall terminate as provided herein.
"Revolving Credit Commitment Termination Date" shall mean September
--------------------------------------------
30, 2004.
"Revolving Credit Loans" shall have the meaning ascribed thereto in
----------------------
Section 2.1.
-----------
"Revolving Credit Note" shall have the meaning ascribed thereto in
---------------------
Section 2.2.
-----------
<PAGE>
"S&P" shall mean Standard & Poor's Rating Group, a division of The
---
McGraw-Hill Companies.
"Security Agreements" shall mean the collective reference to the
-------------------
Borrower Security Agreement and the Borrower Intellectual Property Security
Agreement.
"Security Documents" shall mean the collective reference to the CTN
------------------
Pledge Agreement, the Security Agreements, and all other security documents
hereafter delivered to the Agent granting a Lien on the Capital Stock of
the Borrower or any asset of the Borrower to secure the obligations and
liabilities of the Borrower under the Notes and/or under any of the other
Loan Documents or to secure any guarantee by CTN or any such Loan Party of
any such obligations and liabilities.
"Single Employer Plan" shall mean any Plan which is covered by Title
--------------------
IV of ERISA, but which is not a Multiemployer Plan.
"Solvent" shall mean, as of any date, with respect to any Person, (a)
-------
the property of such Person (on a going concern basis), at fair valuation,
will exceed the debts of such Person, (b) such Person will be able to pay
its debts as such debts become absolute and matured, and (c) such Person
will have, as of such date, sufficient capital with which to conduct its
business. For purposes of this definition, "debt" means "liability on a
claim" and "claim" means (i) any right to payment, whether or not such
right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or
unsecured or (ii) any 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, unmatured, disputed, undisputed, secured or unsecured.
"Subsidiary" shall mean 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 occurrence 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.
"Term Loan Commitment" shall mean, with respect to each Lender, the
--------------------
amount set forth under the heading "Term Loan Commitments" opposite such
Lender's name on Schedule I, as such amount may be reduced from time to
time pursuant to this Agreement. At the Closing Date, the aggregate amount
of the Term Loan Commitments is $15,000,000.
"Term Loan Commitment Percentage" shall mean, as to any Lender, at any
-------------------------------
time, the percentage which such Lender's Term Loan Commitment then
constitutes of the
<PAGE>
aggregate Term Loan Commitments (or, at any time after the Term Loan
Commitments shall have expired or terminated, the percentage which the
aggregate principal amount of such Lender's Term Loans then outstanding
constitute of the aggregate principal amount of the Term Loans then
outstanding).
"Term Loans" shall have the meaning ascribed thereto in Section 2.6.
---------- -----------
"Term Note" shall have the meaning ascribed thereto in Section 2.7.
--------- -----------
"Tranche" shall mean 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).
"Transferee" shall have the meaning ascribed thereto in Section
---------- -------
9.6(f).
------
"Type" shall mean as to any Loan, its nature as an Alternate Base Rate
----
Loan or a Eurodollar Loan.
"UC Holdings" shall have the meaning ascribed thereto in the recitals.
-----------
"UC Holdings Guarantee" shall mean the Guarantee executed by UC
---------------------
Holdings in favor of the Agent, for the benefit of the Lenders,
substantially in the form of Exhibit G-2, as the same may be amended,
-----------
supplemented or otherwise modified from time to time.
"Voting Securities" shall mean any class of Capital Stock of any
-----------------
Person pursuant to which the holders thereof have the general voting power
under ordinary circumstances to vote for the election of members of the
Board of Directors (or equivalent governing body) (irrespective of whether
or not at the time any other class will have or might have voting power by
reason of the occurrence of any contingency).
"Working Capital" shall mean, as of the date of determination thereof,
---------------
the difference, if any, of (a) the current assets (other than cash and Cash
Equivalents) of the Borrower determined in accordance with GAAP, over (b)
the current liabilities (other than the current portion of Indebtedness
which when initially issued or incurred was classified as long-term
Indebtedness, including, without limitation, the Term Loans and the
Revolving Credit Loans) of the Borrower determined in accordance with GAAP.
"WSP" shall mean Willis Stein & Partners, Management II L.L.C., a
---
Delaware limited liability company.
"WSP Dutch" shall mean Willis Stein & Partners Dutch, L.P., a Delaware
---------
limited partnership.
<PAGE>
"WSP II" shall mean Willis Stein & Partners II, L.P., a Delaware
------
limited partnership.
"WSP Guarantee" shall mean the Guarantee executed by WSP II and WSP
-------------
Dutch in favor of the Agent, for the benefit of the Lenders, substantially
in the form of Exhibit H, as the same may be amended, supplemented or
---------
otherwise modified from time to time.
"Year 2000 Compliant" means, with respect to any computer systems
-------------------
(including without limitation all software, hardware, workstations and
related components, automated devices, embedded chips and other date
sensitive equipment), that such computer systems (a) are capable of
recognizing, processing, managing, representing, interpreting, and
manipulating correctly date related data for dates earlier and later than
January 1, 2000, including, but not limited to, calculating, comparing,
sorting, storing, tagging and sequencing, without resulting in or causing
logical or mathematical errors or inconsistencies in any user-interface
functionalities or otherwise, including data input and retrieval, data
storage, data fields, calculations, reports, processing, or any other input
or output, (b) have the ability to provide date recognition for any data
element without limitation (including, but not limited to, date related
data represented without a century designation, date related data whose
year is represented by only two digits and date fields assigned special
values), (c) have the ability to automatically function into and beyond the
year 2000 without human intervention and without any change in operations
associated with the advent of the year 2000, (d) have the ability to
correctly interpret data, dates and time into and beyond the year 2000, (e)
have the ability not to produce noncompliance in existing information, nor
otherwise corrupt such data into and beyond the year 2000, (f) have the
ability to correctly process after January 1, 2000 data containing dates
before that date, and (g) have the ability to recognize all "leap years",
including February 29, 2000.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
-----------------------------
therein, all terms defined in this Agreement shall have their respective defined
meanings when used in the Notes or any certificate or other document made or
delivered pursuant hereto.
(b) As used herein, in the Notes and in any certificate or other
document made or delivered pursuant hereto, accounting terms relating to the
Borrower 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 Article, 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.
<PAGE>
ARTICLE 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Revolving Credit Commitments. (a) Subject to the terms and
----------------------------
conditions hereof, each Lender severally agrees to make revolving credit loans
("Revolving Credit Loans") to the Borrower from time to time during the
----------------------
Revolving Credit Commitment Period in an aggregate principal amount at any one
time outstanding not to exceed the lesser of (i) such Lender's Revolving Credit
Commitment and (ii) such Lender's Revolving Credit Commitment Percentage of the
Availability Amount. During the Revolving Credit Commitment Period, the
Borrower may use the Revolving Credit Commitments by borrowing, prepaying the
Revolving Credit Loans in whole or in part, and reborrowing, all in accordance
with the terms and conditions hereof.
(b) Subject to the last sentence of Section 2.3, the Revolving Credit
-----------
Loans may from time to time be (i) Eurodollar Loans, (ii) Alternate Base Rate
Loans or (iii) a combination thereof, as determined by the Borrower and notified
to the Agent in accordance with Section 2.3 and Section 2.10; provided that no
----------- ------------ --------
Revolving Credit Loan shall be made as a Eurodollar Loan after the day that is
one month prior to the Revolving Credit Commitment Termination Date.
2.2 Revolving Credit Notes. The Revolving Credit Loans made by each
----------------------
Lender shall be evidenced by a promissory note of the Borrower, substantially in
the form of Exhibit A, with appropriate insertions as to payee, date and
---------
principal amount (a "Revolving Credit Note"), payable to the order of such
---------------------
Lender and in a principal amount equal to the lesser of (a) the amount of the
initial Revolving Credit Commitment of such Lender and (b) the aggregate unpaid
principal amount of all Revolving Credit Loans made by such Lender to the
Borrower. Each Lender is hereby authorized to record the date, Type and amount
of each Revolving Credit Loan made by such Lender to the Borrower, each
continuation thereof, each conversion of all or a portion thereof to another
Type, the date and amount of each payment or prepayment of principal thereof
and, in the case of Eurodollar Loans, the length of each Interest Period with
respect thereto, on the schedule annexed to and constituting a part of its
Revolving Credit Notes, and any such recordation shall constitute prima facie
----- -----
evidence of the accuracy of the information so recorded absent manifest error.
Each Revolving Credit Note (i) shall be dated the Closing Date, (ii) shall be
stated to mature on the Revolving Credit Commitment Termination Date and (iii)
shall provide for the payment of interest in accordance with Section 2.12.
------------
2.3 Procedure for Revolving Credit Borrowing. The Borrower may
----------------------------------------
borrow under the Revolving Credit Commitments during the Revolving Credit
Commitment Period on any Business Day; provided that the Borrower shall give the
--------
Agent an irrevocable notice substantially in the form of Exhibit C (a "Notice of
--------- ---------
Borrowing") (which notice must be received by the Agent prior to (a) 12:00 noon,
- ---------
New York City time, three Business Days prior to the requested Borrowing Date,
if all or any part of the requested Revolving Credit Loans are to be Eurodollar
Loans, or (b) 11:00 a.m., New York City time, on the requested Borrowing Date,
otherwise), specifying (i) the amount to be borrowed, (ii) the requested
Borrowing Date,
<PAGE>
(iii) whether the borrowing is to be of Eurodollar Loans, Alternate Base Rate
Loans or a combination thereof and (iv) if the borrowing is to be entirely or
partly of Eurodollar Loans, the amounts of such Eurodollar Loans and the lengths
of the initial Interest Periods therefor. Each borrowing under the Revolving
Credit Commitments shall be in an amount equal to (x) in the case of Alternate
Base Rate Loans, $500,000 or a whole multiple of $100,000 in excess thereof (or,
if the then Available Revolving Credit Commitments are less than $500,000, such
lesser amount) and (y) in the case of Eurodollar Loans, $500,000 or a whole
multiple of $100,000 in excess thereof. Upon receipt of any such notice from the
Borrower, the Agent shall promptly notify each Lender thereof. Each Lender will
make the amount of its pro rata share of each borrowing available to the Agent
for the account of the Borrower at the office of the Agent specified in Section
-------
9.2 prior to 11:00 a.m., New York City time, on Borrowing Date requested in
- ---
funds immediately available to the Agent. Such borrowing will then be made
available to the Borrower by the Agent in the manner specified in such Notice of
Borrowing in the aggregate of the amounts made available to the Agent by the
Lenders and in like funds as received by the Agent. Notwithstanding anything to
the contrary contained herein, Revolving Credit Loans, if any, made on the
Closing Date must be Alternate Base Rate Loans.
2.4 Commitment Fees; Agent Fee. (a) The Borrower agrees to pay to
--------------------------
the Agent for the account of each Lender a commitment fee for the period from
and including the first day of the Revolving Credit Commitment Period to the
Revolving Credit Commitment Termination Date, computed at the rate of 0.50% per
annum on the average daily amount of the excess of such Lender's Revolving
Credit Commitment over the aggregate principal amount of all Revolving Credit
Loans made by such Lender, payable quarterly in arrears on the last day of each
March, June, September and December and on the Revolving Credit Commitment
Termination Date or such earlier date as the Revolving Credit Commitments shall
terminate as provided herein, commencing on the first of such dates to occur
after the date hereof.
(b) The Borrower agree to pay to the Agent, for its own account, for
services rendered by the Agent, an annual administrative fee in the amounts and
at the times referred to in the Fee Letter.
2.5 Optional and Mandatory Termination or Reduction of Revolving
------------------------------------------------------------
Credit Commitments. The Borrower shall have the right, upon not less than three
- ------------------
Business Days' notice (if any Eurodollar Loans are outstanding at such time) or
upon notice on the Business Day of such prepayment (otherwise) to the Agent, to
terminate the Revolving Credit Commitments or, from time to time, to reduce the
amount of the Revolving Credit Commitments. Any such reduction shall be in an
amount equal to $500,000 or a whole multiple of $100,000 in excess thereof and
shall reduce permanently the Revolving Credit Commitments then in effect;
provided that no such termination or reduction shall be permitted if, after
- --------
giving effect thereto and to any prepayments of the Revolving Credit Loans made
on the effective date thereof, the aggregate principal amount of the Revolving
Credit Loans then outstanding would exceed the lesser of (a) the aggregate
Revolving Credit Commitments and (b) the Availability Amount. Any reduction of
the Revolving Credit Commitments shall be accompanied by payment in full of all
accrued commitment fees on the amount so reduced to and including the date of
such reduction. The
<PAGE>
Agent agrees to promptly notify the Lenders of any notice of reduction or
termination received by the Agent.
2.6 Term Loans. (a) Subject to the terms and conditions hereof,
----------
each Lender severally agrees to make term loans ("Term Loans") to the Borrower
----------
on the Closing Date in an amount not to exceed the amount of the Term Loan
Commitment of such Lender then in effect. The Term Loans may from time to time
be (a) Eurodollar Loans, (b) Alternate Base Rate Loans or (c) a combination
thereof, as determined by the Borrower and set forth in a notice to the Agent in
accordance with Section 2.8 and Section 2.10; provided that Term Loans made on
----------- ------------ --------
the Closing Date must be Alternate Base Rate Loans.
2.7 Term Notes. The Term Loan made by each Lender shall be evidenced
----------
by a promissory note of the Borrower, substantially in the form of Exhibit B
---------
(the "Term Note"), with appropriate insertions therein as to payee, date and
---------
principal amount, payable to the order of such Lender and in a principal amount
equal to the aggregate unpaid principal amount of all Term Loans made by such
Lender. Each Lender is hereby authorized to record the date, Type and amount of
each Term Loan made by such Lender, each continuation thereof, each conversion
of all or a portion thereof to another Type, the date and amount of each payment
or prepayment of principal thereof and, in the case of Eurodollar Loans, the
length of each Interest Period with respect thereto, on the schedule annexed to
and constituting a part of its Term Note, and any such recordation shall
constitute prima facie evidence of the accuracy of the information so recorded
----- -----
absent manifest error. The Term Note of each Lender (i) shall be dated the
Closing Date, (ii) shall be payable on the last day of each March, June,
September and December commencing on June 30, 2000, each of which payments shall
be in an amount equal to such Lender's Term Loan Commitment Percentage of the
amount set forth below opposite each such date:
Date Amount
June 30, 2000 $500,000
September 30, 2000 500,000
December 31, 2000 500,000
March 31, 2001 562,500
June 30, 2001 562,500
September 30, 2001 562,500
December 31, 2001 562,500
March 31, 2002 750,000
June 30, 2002 750,000
September 30, 2002 750,000
December 31, 2002 750,000
March 31, 2003 937,500
June 30, 2003 937,500
September 30, 2003 937,500
December 31, 2003 937,500
<PAGE>
March 31, 2004 1,500,000
June 30, 2004 1,500,000
September 30, 2004 1,500,000
provided that if the aggregate amount of Term Loans made by the Lenders is less
- --------
than the amount contemplated by the foregoing amortization schedule, an
appropriate adjustment shall be made to the amount due to each Lender on
September 30, 2004 and, if necessary, the other installments of the Term Loans
in the inverse order of their scheduled maturities and (iii) shall provide for
the payment of interest in accordance with Section 2.12.
------------
2.8 Procedures for Term Loan Borrowing. The Borrower may borrow
----------------------------------
under the Term Loan Commitment only on the Closing Date. Not later than 11:00
a.m., New York City time, on the Closing Date, each Lender shall make available
to the Agent, at the Agent's office specified in Section 9.2, the amount of such
-----------
Lender's pro rata share of the required Term Loans in immediately available
funds. The Agent shall on such date make available, in the manner specified by
the Borrower in such Notice of Borrowing, the aggregate of the amounts made
available to the Agent by the Lenders and in like funds as received by the
Agent. Notwithstanding anything to the contrary contained herein, Term Loans
made on the Closing Date must be Alternate Base Rate Loans.
2.9 Optional and Mandatory Prepayments. (a) Subject to Section
---------------------------------- -------
2.19, the Borrower may, at any time and from time to time prepay the Loans, in
- ----
whole or in part, without premium or penalty, upon at least three Business Days'
(in the case of Eurodollar Loans) irrevocable written notice or upon irrevocable
written notice on the Business Day of such prepayment (otherwise) to the Agent,
specifying the date and amount of prepayment and whether the prepayment is of
Eurodollar Loans, Alternate Base Rate Loans or a combination thereof, and, if of
a combination thereof, the amount allocable to each. Upon receipt of any such
notice, the Agent shall promptly notify each 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 amounts, if any, payable pursuant to
Section 2.19, (except in the case of Revolving Credit Loans which are Alternate
- ------------
Base Rate Loans) accrued interest to such date on the amount prepaid and any
outstanding fees and expenses, if any, then due and owing. Partial prepayments
of the Revolving Credit Loans shall be applied to the Revolving Credit Loans but
shall not reduce the Revolving Credit Commitments unless the Borrower so
specifies in its written notice to the Agent. Partial prepayments of the Term
Loans shall be applied first, pro rata, to all scheduled installments of
-----
principal of the Term Loans and second, if the Term Loans have been repaid in
------
full, to the Revolving Credit Loans (with a concomitant reduction in the
Revolving Credit Commitments); provided that any optional prepayment of the
--------
Revolving Credit Loans shall not reduce the Revolving Credit Commitments unless
the Borrower so specifies in a written notice to the Agent. Amounts prepaid on
account of the Term Loans or to reduce the Revolving Credit Commitments may not
be reborrowed. Partial prepayments shall be in an aggregate principal amount of
$500,000 or a whole multiple of $100,000 in excess thereof.
<PAGE>
(b) With respect to any fiscal year of the Borrower, commencing with
the fiscal year ending December 31, 2000, not later than 90 days after the end
of each fiscal year, the Borrower shall prepay an amount equal to 50% of the
Excess Cash Flow for such fiscal year, which prepayment shall be applied first,
-----
pro rata, to all scheduled installments of principal of the Term Loans and
second, if the Term Loans have been repaid in full, to the Revolving Credit
- ------
Loans (with a concomitant reduction in the Revolving Credit Commitments).
(c) The Borrower shall deliver to the Agent a certificate setting
forth in reasonable detail the calculation of any Net Disposition Proceeds,
together with such Net Disposition Proceeds, within two Business Days of receipt
thereof. Any Net Disposition Proceeds shall be applied first, pro rata to all
----- --- ----
scheduled installments of principal of the Term Loans, and second, if the Term
------
Loans have been repaid in full, to the Revolving Credit Loans (with a
concomitant reduction in the Revolving Credit Commitments).
(d) The Borrower shall deliver to the Agent any Net Insurance
Proceeds within three Business Days of the receipt thereof for application in
the manner set forth in the next sentence; provided that, the Borrower, by
--------
written notice to the Agent delivered within such three Business Day period
(together with a certificate in reasonable detail setting forth the calculation
of such Net Insurance Proceeds), may elect to defer applying such Proceeds in
such manner if and only if (i) concurrent with such notice, such deferred
proceeds are applied to repay the Revolving Credit Loans (with a concomitant
temporary reduction in the Revolving Credit Commitments) and to the extent such
Net Insurance Proceeds exceed $500,000 and the Revolving Credit Commitment has
been temporarily reduced by $500,000, to provide cash collateral under
arrangements acceptable to the Agent, and (ii) within 180 days after receipt by
the Agent of such deferred proceeds (or such cash collateral), the Borrower,
subject to Section 2.5 and Section 2.9 (a), (b), (c), and (e), shall obtain
----------- --------------- --- --- ---
Revolving Credit Loans (or such cash collateral) for purposes of acquiring
Permitted Assets, (it being understood that (A) the Borrower shall first draw
any cash collateral held by the Agent in respect of such Net Insurance Proceeds,
(B) upon expiration of such 180 day period, any portion of such deferred
proceeds (or such cash collateral) that has not been utilized by the Borrower as
a Revolving Credit Loan to acquire replacement assets shall be applied in
accordance with the next succeeding sentence, (C) subject to Section 2.5 and
-----------
Section 2.9 (a), (b), (c), and (e), (1) the Revolving Credit Commitments, upon
- --------------- --- --- ---
each disbursement of such deferred proceeds (or such cash collateral) as a
Revolving Credit Loan for purposes of acquiring replacement assets, shall be
restored by the amount of such disbursement and (2) upon application of such
proceeds (or cash collateral) in accordance with the next succeeding sentence
and subject to the limitations set forth therein, to the extent not previously
done, the Revolving Credit Commitments shall be restored and (D) if any Default
shall occur during such 180 day period, the Agent may, in its discretion, and
shall, if directed by the Required Lenders, apply such deferred proceeds (or
such cash collateral) as a mandatory prepayment in accordance with the next
sentence and (E) the Borrower shall be deemed to have requested Revolving Credit
Loans in an amount equal to such deferred proceeds (or such cash collateral) (as
such amount may have been reduced hereunder) and, in the case of any mandatory
prepayment, such Revolving Credit Loans shall be made regardless of the failure
of the Borrower to satisfy the conditions set forth in Section 4.2). Any Net
-----------
Insurance Proceeds shall be applied as follows: first, pro rata to scheduled
-----
installments of principal of Term Loans in inverse order of
<PAGE>
maturity and second, if the Term Loans have been repaid in full, to the
------
Revolving Credit Loans (with a concomitant reduction in the Revolving Credit
Commitments).
(e) The Borrower shall deliver to the Agent 50% of the amount of any
receivables not collected by the Borrower to the extent such receivables are
reimbursed by the Sellers under Section 4.14 of the AF Acquisition Agreement
------------
within three Business Days of the receipt thereof. Any such reimbursement shall
be applied as follows: first, pro rata to scheduled installments of principal of
-----
Term Loans in inverse order of maturity and second, if the Term Loans have been
------
repaid in full, to the Revolving Credit Loans (with a concomitant reduction in
the Revolving Credit Commitments).
(f) If, on any Business Day, after giving effect to any reduction of
the Revolving Credit Commitments under Section 2.5, the outstanding aggregate
-----------
principal amount of the Revolving Credit Loans exceeds the aggregate amount of
the Revolving Credit Commitments (as so reduced) on the date of such reduction,
the Borrower shall prepay on such Business Day an aggregate principal amount of
the Revolving Credit Loans in an amount equal to such excess.
(g) Each prepayment of the Loans pursuant to this Section 2.9 shall
-----------
be accompanied by (except in the case of Revolving Credit Loans which are
Alternate Base Rate Loans) payment in full of all accrued interest thereon, to
and including the date of such prepayment, together with any additional amounts,
if any, owing pursuant to Section 2.19 and any outstanding fees and expenses due
------------
and owing.
2.10 Conversion and Continuation Options. (a) The Borrower may elect
-----------------------------------
from time to time to convert Eurodollar Loans to Alternate Base Rate Loans by
giving the Agent prior irrevocable notice of such election substantially in the
form of Exhibit D (a "Notice of Conversion") (which notice must be received by
--------- --------------------
the Agent by at least 10:00 a.m., New York City time, three Business Days prior
to such election); provided that any such conversion of Eurodollar Loans may be
--------
made only on the last day of an Interest Period with respect thereto. The
Borrower may elect from time to time to convert Alternate Base Rate Loans to
Eurodollar Loans by giving the Agent prior irrevocable notice of such election
(which notice must be received by the Agent by at least 10:00 a.m., New York
City time, three Business Days prior to such election). Any such notice of
conversion to Eurodollar Loans shall specify the length of the initial Interest
Period or Interest Periods therefor. Upon receipt of any such notice, the Agent
shall promptly notify each Lender thereof. All or any part of the outstanding
Eurodollar Loans and Alternate Base Rate Loans may be converted as provided
herein; provided that (i) no Loan may be converted into a Eurodollar Loan when
--------
any Default has occurred and is continuing and (ii) no Loan may be converted
into a Eurodollar Loan after the date that is one month prior to the Revolving
Credit Commitment Termination Date (in the case of conversions of Revolving
Credit Loans) or the date of the final installment of principal of the Term
Loans, as the case may be.
(b) Any Eurodollar Loans may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrower giving
the Agent prior irrevocable notice (which notice must be received by the Agent
by at least 10:00a.m., New York
<PAGE>
City time, three Business Days prior to such election and in accordance with the
applicable provisions of the term "Interest Period" set forth in Section 1.1,
-----------
and shall state the length of the next Interest Period to be applicable to such
Loans); provided that no Eurodollar Loan may be continued as such (i) when any
--------
Default has occurred and is continuing or (ii) after the date that is one month
prior to the Revolving Credit Commitment Termination Date (in the case of
continuations of Revolving Credit Loans) or the date of the final installment of
principal of Term Loans, as the case may be, and provided, further, that if the
-------- -------
Borrower 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 Alternate Base Rate
Loans on the last day of such then expiring Interest Period. The Agent agrees to
notify the Lenders of any notice of continuation referred to herein received by
the Agent.
2.11 Maximum Amounts of Tranches. All borrowings, conversions and
---------------------------
continuations of Loans hereunder and all selections of Interest Periods
hereunder shall be in such amounts and shall be made pursuant to such elections
so that, after giving effect thereto, the aggregate principal amount of the
Loans comprising each Tranche shall be equal to $500,000 or a whole multiple of
$100,000 in excess thereof. There shall never be more than six Tranches at any
one time outstanding.
2.12 Interest Rates; Default Rate 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 the
first day of such Interest Period (subject to daily adjustments, if any,
required by changes in the Eurocurrency Reserve Requirements) plus the
Applicable Margin.
(b) Each Alternate Base Rate Loan shall bear interest at a rate per
annum equal to the Alternate Base Rate plus the Applicable Margin.
(c) If an Event of Default has occurred and is continuing, (i) the
Eurodollar Loans shall bear interest at a rate per annum equal to the rate then
applicable thereto pursuant to the foregoing provisions of this Section plus 2%
until the last day of the applicable Interest Period, and thereafter at a rate
per annum equal to the Alternate Base Rate then applicable to Alternate Base
Rate Loans plus 2%, and (ii) the Alternate Base Rate Loans shall bear interest
at a rate equal to the Alternate Base Rate then applicable to such Loans plus
2%, in each case from the date of occurrence of such Event of Default until the
date such Event of Default is cured or waived (after as well as before
judgment). In addition, should any interest on such Loans or any commitment fee
or other amount (other than principal) payable hereunder not be paid when due
(whether at the stated maturity, by acceleration or otherwise), such overdue
amount shall bear interest (to the extent permitted by law in the case of
interest on interest) at a rate per annum which is the rate described in Section
-------
2.12(b) plus 2%, in each case, from the date of such non-payment until such
- -------
amount is paid in full (after as well as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date; provided that interest accruing pursuant to Section 2.12(c) shall be
-------- ---------------
payable from time to time on demand.
<PAGE>
2.13 Computation of Interest and Fees. (a) Commitment fees and
--------------------------------
Alternate Base Rate interest shall be calculated on the basis of a 365-day year
and Eurodollar Rate interest shall be calculated on the basis of a 360-day year
for the actual days elapsed. The Agent shall as soon as practicable notify the
Borrower and the Lenders of each determination of a Eurodollar Rate. Any change
in the interest rate on a Loan resulting from a change in the Alternate Base
Rate or the Eurocurrency Reserve Requirements shall become effective as of the
opening of business on the day on which such change becomes effective. The
Agent shall, as soon as practicable, notify the Borrower and the Lenders of the
effective date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Agent pursuant to
any provision of this Agreement shall be conclusive and binding on the Borrower
and the Lenders in the absence of manifest error. The Agent, at the request of
the Borrower, shall deliver to the Borrower a statement showing the quotations
used by the Agent in determining any interest rate pursuant to Section 2.12(a).
---------------
2.14 Inability to Determine Interest Rate. If prior to the first day
------------------------------------
of any Interest Period:
(a) the Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist
for ascertaining the Eurodollar Rate for such Interest Period, or
(b) the Agent shall have received notice from the Required Lenders
that the Eurodollar Rate determined or to be determined for such Interest
Period will not adequately and fairly reflect the cost to such Lenders (as
conclusively certified by such Lenders) of making or maintaining their
affected Loans during such Interest Period,
the Agent shall give telecopy or telephonic notice thereof to the Borrower and
the Lenders as soon as practicable thereafter. If such notice is given, (x) any
Eurodollar Loans requested to be made on the first day of such Interest Period
shall be made as Alternate Base Rate Loans, (y) any Loans that were to have been
converted on the first day of such Interest Period to Eurodollar Loans shall be
continued as Alternate Base Rate Loans and (z) any outstanding Eurodollar Loans
shall be converted, on the first day of such Interest Period, to Alternate Base
Rate Loans. Until such notice has been withdrawn by the Agent, no further
Eurodollar Loans shall be made or continued as such, nor shall the Borrower have
the right to convert Alternate Base Rate Loans to Eurodollar Loans.
2.15 Pro Rata Treatment and Payments; Funding Reliance. (a) Each
-------------------------------------------------
borrowing by the Borrower of Term Loans or Revolving Credit Loans from the
Lenders hereunder, each payment by the Borrower on account of any commitment fee
hereunder and any reduction of the Revolving Credit Commitments or Term Loan
Commitments of the Lenders shall be made pro rata according to the respective
Revolving Credit Commitment Percentages or
<PAGE>
Term Loan Commitment Percentages, as the case may be, of the Lenders. Each
payment (including each prepayment) by the Borrower on account of principal of
and interest on the Revolving Credit Loans or Term Loans, as the case may be,
shall (except as may be required as a result of Section 2.16) be made pro rata
------------
according to the respective outstanding principal amounts of the Revolving
Credit Loans or Term Loans, as the case may be, then held by the Lenders. All
payments (including prepayments) to be made by the Borrower hereunder and under
the Notes, whether on account of principal, interest, fees or otherwise, shall
be made without setoff or counterclaim and shall be made prior to 2:00p.m., New
York City time, on the due date thereof to the Agent, for the account of the
Lenders, at the Agent's office specified in Section 9.2, in Dollars and in
-----------
immediately available funds. The 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, and, with respect to payments of principal and interest
thereon, shall be payable at the then applicable rate during such extension. If
any payment on a Eurodollar Loan becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day (and, with respect to payments of principal and interest thereon,
shall be payable at the then applicable rate during such extension) unless the
result of such extension would be to extend such payment into another calendar
month, in which event such payment shall be made on the immediately preceding
Business Day.
(b) Unless the Agent shall have been notified in writing by any
Lender prior to a borrowing that such Lender will not make available to the
Agent the amount that would constitute its Commitment Percentage of such
borrowing, the Agent may assume that such Lender is making such amount available
to the Agent, and the Agent may, in reliance upon such assumption, make
available to the Borrower a corresponding amount. If such amount is not made
available to the Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to the Agent, on demand, such amount with interest thereon at a
rate equal to the daily average Federal Funds Rate for the period until such
Lender makes such amount immediately available to the Agent. A certificate of
the Agent submitted to any Lender with respect to any amounts owing under this
Section shall be conclusive in the absence of manifest error. If such Lender's
Commitment Percentage of such borrowing is not made available to the Agent by
such Lender within three Business Days of such Borrowing Date, the Agent shall
also be entitled to recover such amount with interest thereon at the rate per
annum applicable to Alternate Base Rate Loans hereunder, on demand from the
Borrower.
2.16 Illegality. Notwithstanding any other provision herein, if the
----------
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such
Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert Alternate Base Rate Loans to Eurodollar Loans shall forthwith be
canceled and (b) such Lender's Loans then outstanding as Eurodollar Loans, if
any, shall be converted automatically to Alternate Base Rate Loans on the
respective last days of the then current Interest Periods with respect to such
Loans or within such earlier period as required by law. If any such conversion
of a Eurodollar Loan occurs on a day which is not the last day of
<PAGE>
the then current Interest Period with respect thereto, the Borrower shall pay to
such Lender such amounts, if any, as may be required pursuant to Section 2.19.
------------
2.17 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 Closing Date:
(i) shall subject any Lender to any tax of any kind whatsoever with
respect to this Agreement, any Note or any Eurodollar Loan made by it, or
change the basis of taxation of payments to such Lender in respect thereof
(except for Non-Excluded Taxes covered by Section 2.18 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 to reduce any amount receivable
hereunder in respect thereof, then, in any such case, the Borrower shall
promptly pay such Lender, upon its demand, any additional amounts necessary to
compensate such Lender for such increased cost or reduced amount receivable. If
any Lender becomes entitled to claim any additional amounts pursuant to this
Section, it shall promptly notify the Borrower, through the Agent, of the event
by reason of which it has become so entitled. This covenant shall survive the
termination of this Agreement and the payment of the Obligations hereunder.
(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 Closing Date has or 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 to a level below that which such Lender
or such corporation could have achieved but for such 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 Borrower (with a
copy to the Agent) of a written request therefor, the Borrower shall pay to such
Lender such additional amount or amounts as will compensate such Lender for such
reduction. This covenant shall survive the termination of this Agreement and
the payment of the Obligations hereunder.
<PAGE>
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall notify the Borrower (with a copy to the
Agent) of the event by reason of which it has become so entitled within 180 days
of the occurrence of such event. A certificate as to any additional amounts
payable pursuant to this subsection shall be conclusive in the absence of
manifest error; provided that the Borrower shall not be liable for any amount
--------
attributable to any period before 180 days prior to the date such Lender
notifies the Borrower of such increased costs.
2.18 Taxes. (a) All payments made by the Borrower under this
-----
Agreement and the Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, 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 Agent or any Lender as a result of a
present or former connection between the 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 Agent or such Lender having executed,
delivered or performed its obligations or received a payment under, or enforced,
this Agreement or the Notes). If any such non-excluded taxes, levies, imposts,
duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") are
------------------
required to be withheld from any amounts payable to the Agent or any Lender
hereunder or under the Notes, the amounts so payable to the Agent or such Lender
shall be increased to the extent necessary to yield to the Agent or such Lender
(after payment of all Non-Excluded Taxes) interest or any such other amounts
payable hereunder at the rates or in the amounts specified in this Agreement and
the Notes. Whenever any Non-Excluded Taxes are payable by the Borrower, as
promptly as possible thereafter, the Borrower shall send to the Agent for its
own account or for the account of such Lender, as the case may be, a certified
copy of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Agent the required
receipts or other required documentary evidence, the Borrower shall indemnify
the Agent and the Lenders for any incremental taxes, interest or penalties that
may become payable by the Agent or any Lender as a result of any such failure.
The covenants in this Section shall survive the termination of this Agreement
and the payment of the Notes and payment of the Obligations hereunder.
(b) Each Lender shall:
(i) deliver to the Borrower and the Agent (A) in the case of a
Lender that is not incorporated under the laws of the United States or any
state thereof, either (x) two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, or successor applicable form,
as the case may be, or, (y) if such Lender is not a "bank" within the
meaning of Section 881(c)(3)(A) of the Code and intends to claim exemption
from U.S. Federal withholding tax under Section 871(h) or Section 881(c) of
the Code with respect to payments of "portfolio interest", a Form W-8, or
any subsequent versions thereof or successors thereto together with a
certificate executed by such Lender representing that (1) such Lender is
not a bank for purposes of Section 881(c) of the
<PAGE>
Code, is not a 10 percent shareholder (within the meaning of Section
871(h)(3)(B) of the Code) of the Borrower and is not a controlled foreign
corporation related to the Borrower (within the meaning of Section
864(d)(4) of the Code), claiming complete exemption from U.S. Federal
withholding tax on payments of interest by the Borrower under this
Agreement and the other Loan Documents and (2) that the Lender has received
in replacement of any Note held by or assigned to it, a QFL Note in
accordance with this Section 2.18, and (B) in the case of any other Lender,
------------
an Internal Revenue Service Form W-8 or W-9, as applicable, or successor
applicable form, as the case may be;
(ii) deliver to the Borrower and the Agent two further copies of
any such form or certification on or before the date that any such form or
certification expires or becomes obsolete and after the occurrence of any
event requiring a change in the most recent form previously delivered by it
to the Borrower; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the Borrower
or the Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrower and the Agent.
Such Lender shall certify (i) in the case of a Form 1001 or 4224, that it is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes and (ii) in the case of a
Form W-8 or W-9, that it is entitled to an exemption from United States backup
withholding tax. Each Person that shall become a Lender or a Participant
pursuant to Section 9.6 shall, upon the effectiveness of the related transfer,
-----------
be required to provide all the forms and statements required pursuant to this
Section; provided that, in the case of a Participant, such Participant shall
--------
furnish all such required forms and statements to the Lender from which the
related participation shall have been purchased.
(c) Any Lender that is not a "bank" within the meaning of Section
881(c)(3)(A) of the Code and satisfies the requirements of Section
-------
2.18(b)(i)(A)(y), (a "Qualified Foreign Lender") shall upon receipt of the
- ---------------- ------------------------
written request of the Agent or the Borrower and may, upon its own written
request to the Agent, exchange any Note held by or assigned to it for a
qualified foreign lender Note (a "QFL Note"). A QFL Note shall be in the form
--------
of the Revolving Credit Note or Term Loan Note, as applicable, but shall contain
the following legend, "This Note is a QFL Note, and as such, ownership of the
obligation represented by such QFL Note may be transferred only in accordance
with Section 2.18 of the Credit Agreement." Any QFL Note issued in replacement
of any existing Note pursuant to this Section shall be (i) dated the Closing
Date, (ii) issued in the name of the entity in whose name such existing Note was
issued and (iii) issued in the same principal amount as such existing Note. Any
Note replaced pursuant to this Section is sometimes referred to herein as a
"Replaced Note".
-------------
(d) The Borrower agrees that, upon the request of or delivery of a
request to a Qualified Foreign Lender pursuant to paragraph (c) of this Section,
the Borrower shall execute
<PAGE>
and deliver a QFL Note to the Agent in replacement of the Replaced Note
surrendered in connection with such request conforming to the requirements of
this paragraph. Each Qualified Foreign Lender shall surrender its Note in
connection with any replacement pursuant to this Section 2.18. Upon receipt by
------------
the Agent, in connection with any replacement, of a QFL Note and the existing
Note to be replaced by such QFL Note in accordance with this paragraph, the
Agent shall forward the QFL Note to the Lender which has surrendered its Note
for replacement by such QFL Note and shall forward the surrendered Note to the
Company marked "canceled". Once issued, QFL Notes (i) shall be deemed to and
shall be "Notes" for all purposes under the Loan Documents, (ii) may not be
exchanged for Notes which are not QFL Notes, notwithstanding anything to the
contrary in the Loan Documents and (iii) shall at all times thereafter be QFL
Notes, including, without limitation, following any transfer or assignment
thereof.
(e) Notwithstanding anything to the contrary in the Loan Documents,
the QFL Notes are registered obligations as to both principal and interest with
the Borrower and transfer of the obligations underlying such QFL Note may be
effected only by surrender of the QFL Note to the Borrower and either reissuance
by the Borrower of such QFL Note to the transferee or issuance by the Borrower
of a new QFL Note to the transferee. A QFL Note shall only evidence the
Lender's or an assignee's right, title and interest in and to the related
obligation, and in no event is a QFL Note to be considered a bearer instrument
or obligation. This Section 2.18 shall be construed so that the obligations
------------
underlying the QFL Notes are at all times maintained in "registered form" within
the meaning of Sections 871(h)(2) and 881(c)(3) of the Code.
2.19 Indemnity. The Borrower agrees to indemnify each Lender and to
---------
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (a) default by the Borrower in payment when due of
the principal amount of or interest on any Eurodollar Loan, (b) default by the
Borrower in making a borrowing of, conversion into or continuation of Eurodollar
Loans after the Borrower has given a notice requesting the same, (c) default by
the Borrower in making any prepayment after the Borrower has given a notice
thereof or (d) the making of a prepayment or conversion of Eurodollar Loans on a
day which is not the last day of an Interest Period with respect thereto
including, without limitation, in each case, any such loss or expense arising
from the redeployment of funds obtained by it or from fees payable to terminate
the deposits from which such funds were obtained. This covenant shall survive
the termination of this Agreement and the payment of the Obligations hereunder.
2.20 Discretion of Lender as to Manner of Funding. Notwithstanding any
--------------------------------------------
other provisions of this Agreement, each Lender shall be entitled to fund and
maintain its funding of all or any part of its Loans in any manner it sees fit,
it being understood that for the purposes of this Agreement all determinations
hereunder shall be made assuming each Lender had actually funded and maintained
each Eurodollar Loan through the purchase of deposits of Dollars in the
eurocurrency interbank market having a maturity corresponding to each Loan's
Interest Period and bearing an interest rate equal to the Eurodollar Rate for
such Interest Period.
<PAGE>
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this Agreement and
to make the Loans, the Borrower hereby represents and warrants to the Agent and
each Lender that:
3.1 Financial Condition. (a) The unaudited balance sheet of the
-------------------
Borrower as at December 31, 1996, December 31, 1997, December 31, 1998 and June
30, 1999 and the related unaudited statements of income for the six-month period
ended on such date, certified by a Responsible Officer of the Borrower, copies
of which have heretofore been furnished to each Lender, present fairly in all
material respects the financial condition of the Borrower at such date, and the
results of its operations for the six-month period then ended (subject to normal
year-end audit adjustments). All such financial statements, including the
related schedules thereto, have been prepared in accordance with GAAP, except
that such unaudited statements lack footnotes and other presentation items,
applied consistently throughout the periods involved (except as approved by such
accountants or Responsible Officer, as the case may be, and as disclosed therein
or in Schedule 3.1).
------------
(b) The pro forma balance sheet of the Borrower (the "Pro Forma
--- ----- ---------
Balance Sheet") is the balance sheet of the Borrower as of June 30, 1999,
- -------------
adjusted to give effect (as if such events had occurred on the Closing Date) (i)
to the AF Acquisition, and (ii) to the Loans expected to be made by the Lenders
on and as of the Closing Date. The Pro Forma Balance Sheet, together with the
notes thereto, presents fairly on a pro forma basis the financial position of
--- -----
the Borrower as at June 30, 1999 assuming that the events and the assumptions
specified in the preceding sentence had actually occurred on such dates.
(c) Except as set forth in Schedule 3.1(c), the Borrower does not
---------------
have, at the date of the Pro Forma Balance Sheet referred to above, any material
Guarantee Obligation, material contingent liability or material liability for
taxes, or any long-term lease or unusual forward or long-term commitment,
including, without limitation, any interest rate or foreign currency swap or
exchange transaction, which is not reflected in the foregoing statements or in
the notes thereto. Except as set forth in Schedule 3.1(c), during the period
---------------
from December 31, 1998 to and including the date hereof there has been no sale,
transfer or other disposition by the Borrower of any material part of its
business or property, other than the sale of finished product inventory in the
ordinary course, and no purchase or other acquisition of any business or
property (including any Capital Stock of any other Person material in relation
to the financial condition of the Borrower at December 31, 1998).
(d) All balance sheets, all statements of income and shareholders
equity and of cash flows and all other financial information which shall
hereafter be furnished by or on behalf of the Borrower to the Agent or any
Lender for the purposes of, or in connection with, this Agreement or any
transaction contemplated hereby have been or will be prepared in accordance with
GAAP consistently applied throughout the periods involved (except as disclosed
therein and subject to normal year-end adjustment and the absence of footnotes
and other presentation items in the case of financial statements for any period
not ending on the last day of a fiscal year), and do or will present fairly, in
all material respects, the financial condition of the Borrower as at the
<PAGE>
dates thereof and the results of their operations and their shareholders equity
and cash flows for the periods then ended.
(e) The operating forecast and cash flow projections of the Borrower
calculated through December 31, 2004, prepared by or under the direct
supervision of a Responsible Officer of the Borrower and a list of the specific
items, each as set forth in Schedule 3.1(e), have each been prepared in good
---------------
faith and utilizing reasonable assumptions. The Borrower does not have any
reason to believe such operating forecast and cash flow projections are
materially incorrect or misleading in any material respect.
3.2 No Change. Since December 31, 1998 (a) there has been no
---------
development or event which has had or could reasonably be expected to have a
Material Adverse Effect, (b) except as set forth on Schedule 3.2, no dividends
------------
or distributions have been declared, paid or made upon the Capital Stock of the
Borrower and (c) none of the Capital Stock of the Borrower has been redeemed,
retired, purchased or otherwise acquired for value except for the purchase by
CTN of the Capital Stock of the Borrower pursuant to the AF Acquisition
Agreement.
3.3 Corporate Existence; Compliance with Law. The Borrower (a) is
----------------------------------------
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has the power and authority, 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 or limited liability company and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, except to the extent that the failure to comply therewith could
not, in the aggregate, reasonably be expected to have a Material Adverse Effect
and (d) is in compliance with all Requirements of Law except to the extent that
the failure to comply therewith could not reasonably be expected to have a
Material Adverse Effect.
3.4 Corporate Power; Authorization; Enforceable Obligations. Each
-------------------------------------------------------
Loan Party has the power and authority, and the legal right, to make, deliver
and perform the Loan Documents to which it is a party and to authorize the
execution, delivery and performance of the Loan Documents to which it is a
party. The Borrower has appropriate power and authority to borrow hereunder and
has taken all necessary corporate action to authorize the borrowings on the
terms and conditions set forth in this Agreement and in the Notes. Except as
set forth on Schedule 3.4, no consent or authorization of, filing with, notice
------------
to or other act by or in respect of, any Governmental Authority (including any
filing, termination of any notice period or consent under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended) or any other Person is required
in connection with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of the Loan Documents and the AF
Acquisition Documents to which either Parent or any Loan Party is a party. This
Agreement has been, and each other Loan Document to which a Loan Party is a
party will be, duly executed and delivered on behalf of such Loan Party. This
Agreement constitutes, and each other Loan Document to which each Loan Party is
a party when executed and delivered will constitute, a legal, valid and binding
obligation of such Loan Party, enforceable against such Loan Party in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency,
<PAGE>
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
3.5 No Legal Bar. The execution, delivery and performance of the
------------
Loan Documents to which a Loan Party is a party, the borrowings by the Borrower
hereunder and the use of the proceeds thereof will not violate any Requirement
of Law or Contractual Obligation of such Loan Party, will not accelerate or
result in the acceleration of any payment obligations of such Loan Party and
will not result in, or require, the creation or imposition of any Lien on any of
the respective properties or revenues of such Loan Party pursuant to any such
Requirement of Law or Contractual Obligation other than as contemplated by the
Security Documents.
3.6 No Material Litigation. Except as set forth on Schedule 3.6, no
---------------------- ------------
litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of the Borrower,
threatened by or against the Borrower or any Loan Party or against any of the
respective properties or revenues of the Borrower or any Loan Party (a) with
respect to any of the Loan Documents or any of the transactions contemplated
hereby or thereby, (b) with respect to any of the AF Acquisition Documents or
(c) which could reasonably be expected to have a Material Adverse Effect.
3.7 No Default. The Borrower is not 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.
3.8 Ownership of Property; Liens. Except as set forth in Schedule
---------------------------- --------
3.8, the Borrower has good record and marketable 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 material property. None of such
property is subject to any Lien except as permitted by Section 6.3.
-----------
3.9 Intellectual Property. The Borrower owns, or is licensed to use,
---------------------
all trademarks, tradenames, copyrights, technology, know-how, processes, logos
and insignia necessary for the conduct of its business as currently conducted
except for those which the failure to own or license could not reasonably be
expected to have a Material Adverse Effect (the "Intellectual Property").
---------------------
Except as set forth on Schedule 3.9, no claim has been asserted and is pending
------------
by any Person challenging or questioning the use of any such Intellectual
Property or the validity or effectiveness of any such Intellectual Property, nor
does the Borrower know of any valid basis for any such claim. The use of such
Intellectual Property by the Borrower does not infringe on the rights of any
Person, except for such claims and infringements that, in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
3.10 No Burdensome Restrictions. No Requirement of Law or Contractual
--------------------------
Obligation of the Borrower could reasonably be expected to have a Material
Adverse Effect.
3.11 Taxes. Except as set forth on Schedule 3.11, each of CTN and the
----- -------------
Borrower has filed or caused to be filed all Federal, state, local and foreign
income tax returns
<PAGE>
and all other material tax returns (including information 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 tax, fee or other charge the amount or
validity of which is 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 CTN and the Borrower; and no tax Lien has been filed
(except for any such Lien permitted under Section 6.3(a)), and, no claim has
---------------
been or is being asserted against CTN or the Borrower in writing or, to the
knowledge of the taxpayer, otherwise, with respect to any such tax, fee or other
charge.
3.12 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 of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect or for any purpose which violates the provisions of the Regulations of
such Board of Governors. If requested by any Lender or the Agent, the Borrower
will furnish to the Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 referred to in said Regulation
U.
3.13 ERISA. The Borrower does not maintain or contribute to any Plan
-----
other than those listed on Schedule 3.13. Except as disclosed in Schedule 3.13,
------------- -------------
the Borrower does not maintain, contribute to or have any material obligation
with respect to, any welfare plan (as defined in Section(3)(1) of ERISA) which
provides benefits to employees after termination of employment other than as
required by Part 6 of Title I of ERISA or similar state laws regarding
continuation of benefits. Except as disclosed on Schedule 3.13, each Plan has
-------------
complied and is in compliance in all material respects with the applicable
provisions of ERISA and the Code. The Borrower has not breached any of the
responsibilities, obligations or duties imposed on it by ERISA, the Code, or
regulations promulgated thereunder with respect to any Plan, which breach could
have a Material Adverse Effect. Neither the Borrower nor any fiduciary of any
Plan who is an officer or an employee of the Borrower has engaged in a nonexempt
prohibited transaction described in Section 406 of ERISA or 4975 of the Code
with respect to a Plan which could have a Material Adverse Effect. With respect
to any employee benefit plan (as defined in Section 3(3) of ERISA) currently or
formerly maintained or contributed to by any Commonly Controlled Entity, no
liability exists and no event has occurred which could subject the Borrower to
any liability, which liability, in either case, could reasonably be expected to
have a Material Adverse Effect. Except as disclosed on Schedule 3.13 and except
-------------
as disclosed pursuant to Section 5.10, the Borrower has not maintained,
------------
contributed to, or had an obligation to contribute to any Multiemployer Plan or
any Single Employer Plan, at any time during the six years prior to the date on
which this representation is made or deemed made. Except as disclosed on
Schedule 3.13, the Borrower does not have any material obligation to make any
- -------------
payment to any employee pursuant to any existing employment contract or
arrangement. The Borrower has given to the Agent copies of all the following:
each Single Employer Plan and related trust agreement (including all amendments
to such Plan and trust) in existence or committed to as of the Closing Date and
the most recent summary plan description, actuarial report, determination letter
issued by the IRS and Form 5500 (including all schedules thereto) filed in
respect of each existing
<PAGE>
Single Employer Plan; a listing of all the Multiemployer Plans with the
aggregate amount of the most recent annual contributions required to be made by
the Borrower to each such Multiemployer Plan, the most recent information which
has been provided to the Borrower regarding withdrawal liability under any
Multiemployer Plan and the collective bargaining agreement pursuant to which
such contribution is required to be made. Except as disclosed in Schedule 3.13,
-------------
the Borrower does not have any liability, direct or indirect, contingent or
otherwise, under Section 4201 or 4204 or 4212(c) of ERISA which could reasonably
be expected to have a Material Adverse Effect. The Borrower does not have any
outstanding liability in respect of (i) a failure to make a required
contribution or payment to a Multiemployer Plan or (ii) a complete or partial
withdrawal under Section 4203 or 4205 of ERISA from such a plan.
3.14 Holding Company; Investment Company Act; Other Regulations.
----------------------------------------------------------
Neither the Borrower nor any Loan Party is a "holding company", a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company", as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. Neither the Borrower nor any 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. Neither the Borrower nor any Loan
Party is subject to regulation under any Federal or state statute, regulation,
decree or order which limits its ability to incur Indebtedness or conditions
such ability upon any act, approval or consent of any Governmental Authority.
3.15 Purpose of Loans. The proceeds of the Term Loans shall be used
----------------
(a) to finance the AF Acquisition and (b) to pay a portion of the transaction
fees and expenses; and the proceeds of the Revolving Credit Loans shall be used
(i) to pay transaction fees and expenses, and (ii) for working capital and
general corporate purposes.
3.16 Environmental Matters. Except as set forth on Schedule 3.16:
--------------------- -------------
(a) The facilities and properties owned, leased or operated by the
Borrower (the "Properties") do not contain, and have not previously
----------
contained, to the knowledge of the Borrower, any Materials of Environmental
Concern in amounts or concentrations which (i) constitute or constituted a
violation of, or (ii) could reasonably be expected to give rise to
liability under, any Environmental Law.
(b) The Properties and all operations at the Properties are in
compliance in all material respects with all applicable Environmental Laws,
and to the knowledge of the Borrower there is no contamination at, under or
about the Properties or violation of any Environmental Law with respect to
the Properties or the business operated by the Borrower (the "Business")
--------
which could materially interfere with the continued operation of any of the
Properties or materially impair the fair saleable value thereof.
(c) The Borrower has not received 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 Properties or the
<PAGE>
Business, nor does the Borrower have knowledge or reason to believe that
any such notice will be received or is being threatened.
(d) Materials of Environmental Concern have not been transported or
disposed of from any of the Properties in violation of, or in a manner or
to a location which could reasonably be expected to give rise to liability
under, any Environmental Law, to the knowledge of the Borrower, nor have
any Materials of Environmental Concern been generated, treated, stored or
disposed of at, on or under any of the Properties in violation of, or in a
manner that could reasonably be expected to give rise to liability under,
any applicable Environmental Law to the knowledge of the Borrower.
(e) No judicial proceeding or governmental or administrative action
is pending or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower is or will be named as a party with
respect to any of the 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 any of the Properties or the
Business.
(f) There has been no release or threat of release of Materials of
Environmental Concern at or from any of the Properties, or arising from or
related to the operations of the Borrower in connection with any of the
Properties or otherwise in connection with the Business, in violation of or
in amounts or in a manner that could reasonably give rise to liability
under Environmental Laws.
3.17 Acquisitions. Schedule 3.17 sets forth a brief summary of the AF
------------ -------------
Acquisition, including all material steps to be taken in connection therewith
(including the sources and uses of funds) upon completion of the AF Acquisition.
3.18 Capitalization of Borrower. As of the Closing Date, the
--------------------------
authorized Capital Stock of the Borrower consists of 200 shares of common stock
of which 100 are issued and outstanding. All the issued and outstanding shares
of Capital Stock of the Borrower are owned beneficially and of record by CTN
free and clear of Liens, options or rights of others except as provided in the
CTN Pledge Agreement. There are no outstanding subscriptions, options,
warrants, calls, puts, rights (including preemptive rights) or any other
agreements or commitments of any nature with respect to such Capital Stock of
the Borrower. No Person has or will have any preemptive rights to subscribe for
any additional Capital Stock of the Borrower.
3.19 Subsidiaries. (a) The Borrower does not have any Subsidiaries.
------------
(b) CTN is the only Subsidiary of UC Holdings.
(c) WSP owns at least 75% of the Fully Diluted Outstanding Capital
Stock of UC Holdings.
<PAGE>
3.20 Insurance. All policies of insurance of any kind or nature
---------
maintained by or issued to the Borrower, including, without limitation, policies
of life, fire, theft, product liability, public liability, property damage,
other casualty, employee fidelity, worker's compensation, employee health and
welfare, title, property and liability insurance, are in full force and effect
in all material respects and are of a nature and provide such coverage as is
sufficient and as is customarily carried by companies of similar size and
character.
3.21 AF Acquisition Documents. (a) The Borrower has delivered to the
------------------------
Lenders and the Agent true, complete and correct copies of each of the AF
Acquisition Documents (including all exhibits, schedules and disclosure letters
referred to therein or delivered pursuant thereto, if any) and all amendments
thereto, waivers relating thereto and other side letters or agreements affecting
the terms thereof. None of such documents and agreements has been amended or
supplemented, nor have any of the provisions thereof been waived, except
pursuant to a written agreement or instrument which has heretofore been
consented to by the Lenders and no consent or waiver has been granted by either
Parent or the Borrower thereunder, and none of such documents and agreements
shall hereafter be amended or supplemented, or any provision thereof waived,
except in accordance with Section 6.16. Each of such AF Acquisition Documents
------------
has been duly executed and delivered by CTN, the Borrower and each other party
thereto and is a legal, valid and binding obligation of CTN, the Borrower and
each other party thereto, as the case may be, enforceable in accordance with its
terms.
(b) The representations and warranties of each Parent, the Borrower
and each other party to the AF Acquisition Documents are true and correct in all
material respects on the Closing Date, as if made on and as of such date
(disregarding, for purposes of this Agreement, any references in such
representations to the phrase "to the Seller's knowledge" and "by which we are
aware" (or words of similar import)) except where the failure of such
representation and warranty could not (to the extent not otherwise qualified by
material adverse effect) reasonably be expected to have a Material Adverse
Effect. Such representations and warranties, together with the definitions of
all defined terms used therein, are by this reference deemed incorporated herein
mutatis mutandis, and each Lender is entitled to rely on the accuracy of such
- ------- --------
representations and warranties.
(c) Each party to the AF Acquisition Documents has complied in all
material respects with all terms and provisions contained therein on its part to
be observed and the AF Acquisition has been duly consummated in accordance with
the terms of the AF Acquisition Documents.
3.22 Security Documents. (a) Each Security Agreement creates in
------------------
favor of the Agent, for the benefit of the Lenders, a valid and perfected first
priority security interest in all right, title and interest of the Loan Party
which is party thereto in the collateral described therein, and all filings and
other actions necessary or desirable to perfect and protect such security
interests have been duly taken or shall be duly taken promptly after the Closing
Date. The Loan Parties are the legal and beneficial owners of the collateral
described in the Security Agreements free and clear of any Lien, except for
Liens created under the Loan Documents or permitted under Section 6.3.
-----------
<PAGE>
(b) The CTN Pledge Agreement is effective to create in favor of the
Agent, for the benefit of the Lenders, a valid and perfected first priority
security interest in the Pledged Stock described therein and the proceeds
thereof and, when stock certificates representing such Pledged Stock have been
delivered to the Agent, such CTN Pledge Agreement shall constitute a fully
perfected first Lien on, and security interest in, all right, title and interest
of CTN thereto in the Pledged Stock and the proceeds thereof described therein
subject to continuous possession of the pledged securities by the Agent.
3.23 Accuracy and Completeness of Information. All information,
----------------------------------------
reports and other papers and data (other than projections) with respect to
either Parent or the Borrower (in each case, prior to and after giving effect to
the AF Acquisition), taken as a whole, furnished to the Lenders by such Parent,
the Borrower, or on behalf of such Parent, the Borrower, were, at the time
furnished, complete and correct in all material respects, or have been
subsequently supplemented by other information, reports or other papers or data,
to the extent necessary to give the Lenders a true and accurate knowledge of the
subject matter in all material respects. All projections with respect to either
Parent or the Borrower, furnished by either Parent or the Borrower, were
prepared and presented in good faith by such Parent and the Borrower based upon
facts and assumptions that such Parent and the Borrower believe to be reasonable
in light of current and foreseeable conditions. No document furnished or
statement made in writing to the Lenders by or on behalf of Parents or the
Borrower in connection with the negotiation, preparation or execution of this
Agreement contains any untrue statement of a material fact, or omits to state
any such material fact necessary in order to make the statements contained
therein not misleading, in either case which has not been corrected,
supplemented or remedied by subsequent documents furnished or statements made in
writing to the Lenders. There is no fact known to either Parent or the Borrower
which has, or could reasonably be expected to have, a Material Adverse Effect.
3.24 Labor Matters. The Borrower is not a party to any collective
-------------
bargaining agreements. There are no strikes, lockouts or other labor disputes
pending or threatened against the Borrower which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect. The
hours worked and payments made to employees of the Borrower have not been in
violation of the Fair Labor Standards Act of 1938, as amended, or any other
applicable Requirement of Law, except to the extent such violations could not,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect. All material payments due from the Borrower on account of wages
and employee health and welfare insurance and other benefits have been paid or
accrued as a liability on the books of the Borrower.
3.25 Leaseholds, Permits, etc. Each of the Borrower possesses or has
------------------------
the right to use, all leaseholds, easements, franchises and permits and all
authorizations and other rights which are material to and necessary for the
conduct of its business. Except for such noncompliance with the foregoing which
could not reasonably be expected to have a Material Adverse Effect, all the
foregoing are in full force and effect, and the Borrower is in substantial
compliance with the foregoing without any known conflict with the valid rights
of others. No event has occurred which permits, or after notice or lapse of
time or both would permit, the
<PAGE>
revocation or termination of any such leasehold, easement, franchise, license or
other right, which termination or revocation, considered as a whole, could
reasonably be expected to have a Material Adverse Effect.
3.26 Solvency. After giving effect to the AF Acquisition and to the
--------
borrowings hereunder to be made on the Closing Date or such other date as Loans
requested hereunder are made, each Loan Party is Solvent.
3.27 Year 2000 Compliance. (a) Except as set forth on Schedule 3.27,
-------------------- -------------
the computer systems of the Borrower (including without limitation all software,
hardware, workstations and related components, automated devices, embedded chips
and other date sensitive equipment) are Year 2000 Compliant, except to the
extent that the failure of any such computer systems to be Year 2000 Compliant
will not have a Material Adverse Effect.
(b) Except as set forth on Schedule 3.27, the computer systems of the
-------------
Borrower have the ability to properly interface and will continue to properly
interface with internal and external applications and systems of third parties
with whom the Borrower and its subsidiaries exchange data electronically
(including without limitation customers, clients, suppliers, service providers,
subcontractors, processors, converters, shippers, warehousemen, outsourcers,
data processors, regulatory agencies and banks) whether or not they have become
Year 2000 Compliant.
(c) Except as set forth on Schedule 3.27, to the knowledge of the
-------------
Borrower the software of all such third parties is Year 2000 Compliant.
ARTICLE 4. CONDITIONS PRECEDENT
4.1 Conditions to Initial Loans. The agreement of each Lender to
---------------------------
make the Loan requested to be made or maintained by it on the Closing Date is
subject to the satisfaction, immediately prior to or concurrently with the
making or maintaining of such Loan on the Closing Date, of the following
conditions precedent:
(a) Loan Documents. The Agent shall have received (i) this Agreement,
--------------
executed and delivered by a duly authorized officer of the Borrower, with a
counterpart for each Lender, (ii) for the account of each Lender, a
Revolving Credit Note and Term Note conforming to the requirements hereof
each executed by a duly authorized officer of the Borrower, (iii) the CTN
Pledge Agreement, executed and delivered by an authorized officer of CTN,
with a counterpart or a conformed copy for each Lender, (iv) the Borrower
Security Agreement, executed and delivered by a duly authorized officer of
the Borrower, with a counterpart or a conformed copy for each Lender, (v)
the Borrower Intellectual Property Security Agreement, executed by a duly
authorized officer of the Borrower, and (vi) the Corporate Guarantees,
each executed by a duly authorized officer of the Loan Party thereto. The
Agent shall have received the Fee Letter, executed and delivered to the
Agent by a duly authorized officer of the Borrower.
<PAGE>
(b) Corporate Proceedings of the Borrower. The Agent shall have
-------------------------------------
received, with a counterpart for each Lender, a copy of the resolutions, in
form and substance satisfactory to the Agent, of the Board of Directors of
the Borrower authorizing (i) the execution, delivery and performance of
this Agreement, the Notes and the other Loan Documents to which it is a
party, (ii) the borrowings contemplated hereunder and (iii) the execution,
delivery and performance of the AF Acquisition Documents to which it is a
party and all closing documents delivered in connection therewith,
certified by the Secretary or an Assistant Secretary of the Borrower as of
the Closing Date, which certificate shall state that the resolutions
thereby certified have not been amended, modified, revoked or rescinded and
shall be in form and substance satisfactory to the Agent.
(c) Borrower Incumbency Certificates. The Agent shall have received,
--------------------------------
with a counterpart for each Lender, a certificate of the Borrower, dated
the Closing Date, as to the incumbency and signature of the officers of the
Borrower executing any Loan Document, any AF Acquisition Document and any
related documents, satisfactory in form and substance to the Agent,
executed by the Chief Executive Officer or any Vice President and the
Secretary or any Assistant Secretary of the Borrower.
(d) Corporate Proceedings of the Parents. The Agent shall have
------------------------------------
received, with a counterpart for each Lender, a copy of the resolutions of
the Board of Directors (or managing member, as applicable) of each Parent
authorizing the execution, delivery and performance of the applicable
Parent Guarantee and the other Loan Documents to which it is a party and
all closing documents delivered in connection therewith, certified by the
Secretary or an Assistant Secretary (or managing member, as applicable) of
such Parent, as of the Closing Date, which certificate shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded and shall be in form and substance satisfactory to the Agent.
(e) Parent Incumbency Certificates. The Agent shall have received,
------------------------------
with a counterpart for each Lender, a certificate of each Parent, dated the
Closing Date, as to the incumbency and signature of the officers or members
of such Parent executing any Loan Documents and any related documents
satisfactory in form and substance to the Agent, executed by the President
or any Vice President and the Secretary or an Assistant Secretary of such
Parent.
(f) Corporate Proceedings of WSP II and WSP Dutch. The Agent shall
---------------------------------------------
have received, with a counterpart for each Lender, a copy of the
resolutions of the Board of Directors (or the general partner) of each of
WSP II and WSP Dutch authorizing the execution, delivery and performance of
the WSP Guarantee and the other Loan Documents to which it is a party and
all closing documents delivered in connection therewith, certified by the
Secretary or an Assistant Secretary (or the general partner) of each of WSP
II and WSP Dutch, as of the Closing Date, which certificate shall state
that the
<PAGE>
resolutions thereby certified have not been amended, modified, revoked or
rescinded and shall be in form and substance satisfactory to the Agent.
(g) WSP Incumbency Certificates. The Agent shall have received, with
---------------------------
a counterpart for each Lender, a certificate of WSP, dated the Closing
Date, as to the incumbency and signature of the officers or general partner
of WSP executing any Loan Documents and any related documents satisfactory
in form and substance to the Agent, executed by the President or any Vice
President and the Secretary or an Assistant Secretary (or the general
partner)of WSP.
(h) Organizational Documents. The Agent shall have received, with a
------------------------
counterpart for each Lender, true and complete copies of the constituent
documents of each Parent, the Borrower and each other Loan Party
(including, in the case of any Loan Party that is a limited partnership or
limited liability company, such Loan Party's limited partnership agreement
or operating agreement, respectively), certified as of the Closing Date as
complete and correct copies thereof by the Secretary or an Assistant
Secretary of such Parent, the Borrower or such Loan Party, as the case may
be.
(i) Consents, Licenses and Approvals. The Agent shall have received,
--------------------------------
with a counterpart for each Lender, a certificate of a Responsible Officer
of the Borrower (i) attaching copies of all consents, authorizations and
filings referred to in Schedule 3.4 with respect to the Borrower, and (ii)
------------
stating that such consents, licenses and filings are in full force and
effect, and each such consent, authorization and filing shall be in form
and substance satisfactory to the Agent.
(j) Closing Fees and Expenses. The Agent shall have received the fees
-------------------------
to be received on the Closing Date referred to in the Fee Letter and the
reimbursement of all costs and expenses (including the fees and expenses of
counsel to the Agent to the extent billed to such date).
(k) Legal Opinions. The Agent shall have received, with a counterpart
--------------
for each Lender, the executed legal opinions of counsel to the Parents, the
Borrower and WSP II and WSP Dutch, substantially in the forms of Exhibits
--------
J-1, J-2, and J-3, respectively, and covering such other matters incident
--- --- ---
to the transactions contemplated by this Agreement as the Agent may
reasonably require.
(l) AF Acquisition Documents; Certificate. The Agent shall have
-------------------------------------
received, with copies for each Lender, true and correct copies of each of
the AF Acquisition Documents including all schedules and exhibits thereto
and side letters affecting the terms thereof or otherwise delivered in
connection therewith together with all closing documents, opinions and
certificates executed in connection therewith, which shall all be in full
force and effect. The AF Acquisition Documents shall not have been
amended, supplemented or otherwise modified since the date thereof, except
as may have been consented to in writing by the Lenders. The AF
Acquisition Documents shall be accompanied by a certificate, dated the
Closing Date, of a Responsible Officer of each of
<PAGE>
CTN and the Borrower to such effect. The transactions described in the AF
Acquisition Documents shall have been consummated strictly in accordance
with the terms and provisions thereof and each of CTN, the Borrower and
each other party to the AF Acquisition Documents shall be in compliance
with all the terms of the AF Acquisition Documents to which it is a party
and the Agent shall have received, with a copy for each Lender, a
certificate of a Responsible Officer of each of CTN and the Borrower
certifying that the only condition to the consummation of the AF
Acquisition remaining to be satisfied under the AF Acquisition Documents
(which condition shall be satisfied substantially simultaneously with the
making of the Loans) is the delivery of funds sufficient to pay the
consideration under the AF Acquisition Documents.
(m) Opinions Relating to AF Acquisition Documents. The Agent shall
---------------------------------------------
have received, with a counterpart for each Lender, a copy of the legal
opinion referred to in Sections 5.1(g) and 5.2(f) of the AF Acquisition
--------------- ------
Agreement (together, if such opinion does not permit the Agent and the
Lenders to rely thereon, with a letter from counsel rendering such opinion
permitting the Agent and the Lenders to rely thereon as if such opinion
were addressed to the Agent and the Lenders directly) with such additional
opinions covering such other matters as the Agent may reasonably require.
(n) Corporate and Legal Structure. The Lenders shall be satisfied
-----------------------------
with the corporate and legal structure and capitalization of each Loan
Party and each of its Subsidiaries, including the terms and conditions of
the charter, bylaws, operating agreement, limited partnership agreement and
each class of Capital Stock of each Loan Party and each such Subsidiary and
of each agreement or instrument relating to such structure or
capitalization.
(o) Closing Certificate. The Agent shall have received, with a
-------------------
counterpart for each Lender, a closing certificate of the Parents and the
Borrower substantially in the form of Exhibit K, dated the Closing Date.
---------
(p) Pledged Stock; Stock Powers. The Agent shall have received
---------------------------
certificates representing the Pledged Stock pursuant to the CTN Pledge
Agreement, together with an undated stock power executed in blank for each
such certificate and an acknowledgment of and consent to such Pledge
Agreement by the Borrower.
(q) Filings, Registrations and Recordings. All filings, registrations
-------------------------------------
and recordings listed in Schedule 4.1(q) shall have been properly filed,
---------------
registered or recorded in each jurisdiction listed in Schedule 4.1(q). Any
---------------
documents (including, without limitation, financing statements) required to
be filed under any of the Security Documents in order to create, in favor
of the Agent, a perfected security interest in the collateral thereunder
shall be in proper form to be filed and shall be duly and properly filed in
each office in each jurisdiction listed in the applicable Security Document
promptly after the Closing Date, and such filings are the only ones
required in order to create in favor of the Agent, for the benefit of the
Lenders, a perfected Lien on the respective collateral described therein in
the jurisdictions listed on Schedule 4.1(q). The Agent shall have
---------------
<PAGE>
received evidence reasonably satisfactory to it of each such filing,
registration or recordation and satisfactory evidence of the payment of any
necessary fee, tax or expense relating thereto.
(r) Insurance. The Agent shall have received evidence satisfactory to
---------
it of the existence of the insurance required hereunder and pursuant to the
Security Documents and the Agent, for the benefit of the Lenders, shall
have been named as loss payee under each insurance policy maintained by the
Borrower (other than, in each case, worker's compensation, public
liability, employee benefits and welfare insurance).
(s) Sources and Uses; Equity Investment. The Agent shall have
-----------------------------------
received, with a copy for each Lender, a schedule of sources and uses
substantially in the form of Schedule 4.1(s), setting forth the application
---------------
of the proceeds of the Loans made on the Closing Date and the other amounts
received or paid in connection with the AF Acquisition and the financing
thereof, such schedule to be certified by a Responsible Officer of each of
the Parents and the Borrower.
(t) CTN Equity Proceeds. UC Holdings shall have received not less
-------------------
than $15,000,000 cash equity from WSP and contributed such equity to CTN.
CTN shall have received such cash equity from UC Holdings and shall have
utilized such equity to effect the AF Acquisition.
(u) Financial Information. The Agent shall have received, with a
---------------------
counterpart for each Lender, a copy of each of the financial statements
referred to in Section 3.1 of this Agreement, Section 7(j) of each of the
----------- ------------
Parent Guarantees and Section 7(i) of the WSP Guarantee, in each case in
------------
form and substance satisfactory to the Agent and the Lenders.
(v) Payoff Letters. The Agent shall have received signed payoff
--------------
letters from each Person who on the Closing Date is a lender or other
creditor to the Borrower evidencing that any Indebtedness of such Borrower
to such lender or other creditor has been repaid in full and all
obligations terminated and liens released.
(w) Lien Searches. The Agent shall have received (i) lien searches
-------------
with respect to the assets of the Borrower under such names and in such
jurisdictions as the Agent shall have requested and the results of such
lien searches shall be satisfactory to the Agent and (ii) without limiting
the foregoing, delivery to the Agent of duly executed termination
statements on form UCC-3 requested by the Agent, and the taking by the
Borrower of any other actions necessary or, in the opinion of the Agent,
desirable to terminate any existing liens created with respect to the
assets acquired pursuant to the AF Acquisition Documents.
(x) Solvency Certificate. The Agent shall have received, with a
--------------------
counterpart for each Lender, (i) a certificate from a Responsible Officer
of each of the Parents and the Borrower in form and substance satisfactory
to the Agent and (ii) a letter from a
<PAGE>
Responsible Officer of each of WSP II and WSP Dutch in form and substance
satisfactory to the Agent, in each case to the effect that such Loan Party
is, Solvent.
(y) No Material Adverse Effect. Since December 31, 1998, no Material
--------------------------
Adverse Effect shall have occurred.
(z) LaSalle Bank Waiver. The Agent shall have received, with a copy
-------------------
for each Lender, a waiver to the CTN Credit Agreement, duly executed by the
parties thereto, in form and substance satisfactory to the Agent, certified
by the Borrower.
(aa) Management Agreement. The Agent shall have received, with a copy
--------------------
for each Lender, the Management Agreement, duly executed by the Borrower
and CTN in form and substance satisfactory to the Agent.
4.2 Conditions to Each Loan. The agreement of each Lender to make
-----------------------
any Loan requested to be made by it on any date (including, without limitation,
its initial Loan) is subject to the satisfaction of the following conditions
precedent:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties made by each Parent, the Borrower and each other Loan Party in
or pursuant to the Loan Documents shall be true and correct in all material
respects on and as of such date as if made on and as of such date (other
than any such representations or warranties that, by their terms, refer to
a specific date other than such date, in which case as of such specific
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 Loans
requested to be made on such date.
(c) Additional Matters. All corporate and other proceedings, and all
------------------
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement, the other Loan Documents and
the AF Acquisition Documents shall be satisfactory in form and substance to
the Agent, and the Agent shall have received such other documents,
instruments and legal opinions in respect of any aspect or consequence of
the transactions contemplated hereby or thereby as it shall reasonably
request.
Each borrowing by the Borrower hereunder shall constitute a representation and
warranty by the Borrower as of the date of such Loan that the conditions
contained in this Section 4.2 have been satisfied.
-----------
<PAGE>
ARTICLE 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Note remains outstanding and unpaid or any Obligation is owing to
any Lender or the Agent hereunder, the Borrower shall:
5.1 Financial Statements. Furnish to each Lender:
--------------------
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the balance sheet of the
Borrower as at the end of such year and the related statements of income,
shareholders and members equity and cash flows for such year, setting forth
in each case in comparative form the figures as of the end of and for the
previous year, reported on without a "going concern" or like qualification
or exception, or qualification arising out of the scope of the audit, by
PricewaterhouseCoopers LLP or other independent certified public
accountants of nationally recognized standing, together with a
consolidating balance sheet and consolidating statements of income and cash
flows of the Borrower, reviewed by PricewaterhouseCoopers LLP or such other
independent certified public accountants;
(b) as soon as available, but in any event not later than 45 days
after the end of each quarterly period of the Borrower, the unaudited
balance sheet of the Borrower as at the end of such quarter and the related
unaudited statements of income and cash flows of the Borrower for such
quarter and the portion of the fiscal year through the end of such quarter
and setting forth in each case in comparative form the figures from the
budget for such fiscal year furnished to the Lenders pursuant to Section
-------
5.2(d) and the actual figures for the corresponding date or period in the
------
previous year, certified by a Responsible Officer as being fairly stated in
all material respects (subject to normal year-end audit adjustments);
(c) as soon as available, but in any event not later than 30 days
after the end of each calendar month of the Borrower, the regularly
prepared unaudited income statements of the Borrower as at the end of 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
comparable period from the budget for such fiscal year furnished to the
Lenders pursuant to Section 5.2(d) and the actual figures for the
--------------
corresponding date or period in the previous year, certified by a
Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments);
(d) as soon as available, but in any event by November 30, 1999, a
copy of the balance sheet of the Borrower as at the end of each of December
31, 1997 and December 31, 1998 and the related statements of income,
shareholders and members equity and cash flows for each such year, setting
forth in each case in comparative form the figures as of the end of and for
the previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope of
the audit, by
<PAGE>
PricewaterhouseCoopers LLP or other independent certified public
accountants of nationally recognized standing, together with a
consolidating balance sheet and consolidating statements of income and cash
flows of the Borrower, reviewed by PricewaterhouseCoopers LLP or such other
independent certified public accountants; and
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 as approved by such accountants or officer, as the case may be,
and disclosed therein and except for year-end adjustments and the absence of
footnotes on quarterly and monthly financial statements).
5.2 Certificates; Other Information. Furnish to each Lender:
-------------------------------
(a) concurrently with the delivery of the financial statements
referred to in Section 5.1(a), a certificate of the independent certified
--------------
public accountants reporting on such financial statements stating that, in
accordance with then current standards promulgated by the American
Institute of Certified Public Accountants, in making the examination
necessary therefor no knowledge was obtained of any Default or Event of
Default, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in Section 5.1(a), Section 5.1(b) and Section 5.1(c), a
-------------- -------------- --------------
certificate of a Responsible Officer of the Borrower stating that, to the
best knowledge of such Responsible Officer, during the period covered by
such financial statements, the Borrower during such period has observed or
performed all its covenants and other agreements, and satisfied every
condition, contained in this Agreement and in each other Loan Document to
which it is a party to be observed, performed or satisfied by it, and that
such Officer has obtained no knowledge of any Default or Event of Default
except, in each case, as specified in such certificate;
(c) concurrently with the delivery of the financial statements
referred to in Section 5.1(b), a certificate of a Responsible Officer of
--------------
the Borrower, substantially in the form of Exhibit L (the "Compliance
--------- ----------
Certificate"), showing (i) compliance by the Borrower with the applicable
-----------
covenants contained in Section 5.9, Section 6.1 and Section 6.8, (ii) to
----------- ----------- -----------
the extent not otherwise required to be delivered pursuant to Section 5.1
-----------
and Section 5.2, and computation of the Leverage Ratio for such period for
-----------
purposes of determining the Applicable Margin, the Availability Amount and
covenant compliance;
(d) not later than 30 days after the end of each fiscal year of the
Borrower, a copy of the projections by the Borrower of the operating budget
and cash flow budget of the Borrower for the succeeding fiscal year set
forth on a monthly basis, such projections to be accompanied by a
certificate of a Responsible Officer to the effect that such projections
have been prepared on the basis of sound financial planning practices and
that such Responsible Officer has no reason to believe that such
projections are incorrect or
<PAGE>
misleading in any material respect and shall in any event include a
description of all proposed Capital Expenditures of the Borrower or for
such succeeding fiscal year;
(e) within ten days after the same are sent, copies of all financial
statements and reports which the Borrower generally sends to its
shareholders, and within ten days after the same are filed, copies of all
financial statements and reports which the Borrower may make to, or file
with, the Securities and Exchange Commission or any successor or analogous
Governmental Authority;
(f) promptly upon receipt thereof, copies of all substantive
management letters and other substantive material reports which are
submitted to the Borrower by its independent accountants in connection with
any annual or interim audit of the books of the Borrower made by such
accountants;
(g) within 30 days after the end of each fiscal year, a report
setting forth the 10 largest advertising placement customers of the
Borrower for the prior 12 months and providing such other information with
respect to such customers and advertising placement revenue for the
Borrower as the Agent may reasonably request;
(h) within 10 Business Days after entering into any collective
bargaining agreement, a Schedule 3.24 setting forth a description of such
-------------
agreement; and
(i) promptly, such additional financial and other information as any
Lender may from time to time reasonably request.
5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at
----------------------
or before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, 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 Borrower.
5.4 Maintenance of Existence. Renew and keep in full force and
------------------------
effect its corporate existence (except for any dissolution permitted under
Section 6.5), take all reasonable action to maintain all rights, privileges and
- -----------
franchises necessary or desirable in the normal conduct of its business except
to the extent such failure to maintain could not, in the aggregate, reasonably
be expected to have a Material Adverse Effect and comply, in all material
respects, with all Contractual Obligations and Requirements of Law.
5.5 Maintenance of Property; Insurance. Keep all material property
----------------------------------
useful and necessary in its business in good working order and condition,
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, libel, business interruption and storm
damage) as are usually insured against in the same general area by companies
engaged in the same or a similar business and name the Agent, for the benefit of
the Lenders, as loss payee under each such policy (other than worker's
compensation, public liability, employee
<PAGE>
benefits and welfare insurance), and furnish to each Lender, upon request, full
information as to the insurance carried including certified copies of policies
and certificates of insurance from the Borrower's insurance broker, who shall be
reasonably acceptable to the Required Lenders. If the Borrower receives any Net
Insurance Proceeds (other than workmen's compensation, public liability,
employee benefits and welfare insurance) the Borrower shall promptly, and, in
any event, within three Business Days after receipt thereof, deliver such Net
Insurance Proceeds to the Agent for application in accordance with Section
-------
2.9(d).
- ------
5.6 Inspection of Property; Books and Records; Discussions. Keep
------------------------------------------------------
proper books of records and account, in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit after
reasonable prior written notice (provided no notice shall be required if an
Event of Default then exists) representatives of the Agent or any Lender to
visit and inspect any of its properties and examine and make abstracts from any
of its books and records at any reasonable time and as often as may reasonably
be desired, and to discuss the business, operations, properties and financial
and other condition of the Borrower with officers and employees of the Borrower
and with its independent certified public accountants.
5.7 Notices. Promptly after the Borrower knows or has reason to know
-------
thereof, and, in any event, within 5 days thereof with respect to any notice
under clause (a) or 10 days with respect to any other notice under this Section,
give notice to the Agent and each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation with an original term of 12 months or more of the Borrower, or
(ii) litigation, investigation or proceeding involving an amount in excess
of $250,000 which may exist at any time between the Borrower and any
Governmental Authority, which in either case, if not cured or if adversely
determined, as the case may be, could reasonably be expected to have a
Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower in which the
amount involved is $250,000 or more and is not covered by insurance or in
which injunctive or similar relief is sought;
(d) any material labor dispute to which the Borrower may become a
party and which involves any group of employees, any strikes or walkouts
relating to any of its plants or facilities and the expiration or
termination of any labor contract to which the Borrower is a party or by
which the Borrower is bound; and
(e) any other development or event which could reasonably be expected
to have a Material Adverse Effect.
<PAGE>
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Loan Parties propose to take with respect thereto.
5.8 Environmental Laws. (a) Comply in all material respects, 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, except, in each case, to the extent that failure
to do so could not be reasonably expected to have a Material Adverse Effect.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws except to the extent that the same are being contested in good faith by
appropriate proceedings and the pendency of such proceedings could not be
reasonably expected to have a Material Adverse Effect.
(c) Defend, indemnify and hold harmless the Agent and the Lenders,
and their respective parents, subsidiaries, affiliates, employees, agents,
officers and directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or nature
known or unknown, contingent or otherwise, arising out of, or in any way
relating to the violation of, noncompliance with or liability under any
Environmental Laws applicable to the operations of the Borrower or the
Properties, or any orders, requirements or demands of Governmental Authorities
related thereto, including, without limitation, reasonable attorneys' and
consultants' fees, investigation and laboratory fees, response costs, court
costs and litigation expenses, except to the extent that any of the foregoing
arise out of the gross negligence or willful misconduct of the party seeking
indemnification therefor. This indemnity shall continue in full force and effect
regardless of the termination of this Agreement.
5.9 Interest Rate Protection. If the Eurodollar Base Rate for three-
------------------------
month loans exceeds 6.5% for five consecutive Business Days, then within 30 days
after such fifth Business Day, enter into and maintain one or more Hedging
Agreements in an aggregate notional principal amount not less than 40% of the
aggregate outstanding amount of Funded Debt of the Borrower consisting of Loans;
provided that no Hedging Agreement other than a Hedging Agreement with the Agent
- --------
or any Lender or Affiliate thereof shall create a Lien on, or be secured by, the
assets of the Borrower.
5.10 ERISA. (a) Establish, maintain and operate all Plans to comply
-----
in all material respects with the applicable provisions of ERISA, the Code, and
all other applicable laws, and the regulations and interpretations thereunder
and the respective requirements of the governing documents for such Plans;
<PAGE>
(b) Within ten Business Days after receipt by the Borrower of any
unfavorable determination letter from the IRS regarding the qualification of a
Plan under Section 401(a) of the Code, and promptly following the request of the
Agent for any favorable determination letters, provide the Agent and the Lenders
with copies of each such letter;
(c) Within ten Business Days after the filing thereof, provide Agent
and the Lenders with copies of any annual report (IRS Form 5500 series) with
respect to a Single Employer Plan, including Schedule B thereto;
(d) Within ten Business Days after the Borrower knows or has reason
to know that a non-exempted prohibited transaction (defined in Sections 406 of
ERISA and 4975 of the Code) has occurred, a statement of the chief financial
officer of the Borrower describing such transaction and the action which the
Borrower, as applicable, has taken, is taking or proposes to take with respect
thereto;
(e) Within ten Business Days after the filing thereof, provide the
Agent and the Lender with copies of each actuarial report for any Single
Employer Plan and each actuarial report and annual report received from any
Multiemployer Plan;
(f) Within ten Business Days prior to the occurrence thereof,
notification of any material increase in the benefits of any existing Single
Employer Plan or the establishment by the Borrower of any new Single Employer
Plan or any Multiemployer Plan or the commencement of contributions by the
Borrower to any Single Employer Plan or any Multiemployer Plan to which the
Borrower was not previously contributing and, upon such notification, if
necessary, the Agent shall modify the representations and warranties set forth
in Section 3.13 to reflect the matters contained in such notice in a manner
------------
reasonably acceptable to the Agent;
(g) Within ten Business Days after the Borrower or any Commonly
Controlled Entity knows or has reason to know thereof: (i) the occurrence of
any Reportable Event with respect to any Benefit Plan or Multiemployer Plan, a
failure to make any required contribution to a Benefit Plan or Multiemployer
Plan, the creation of any Lien in favor of the PBGC or a Benefit Plan or
Multiemployer Plan or any withdrawal from, or the receipt of notice with respect
to the termination, Reorganization or Insolvency of, any Multiemployer Plan or
(ii) the institution of proceedings or the receipt of notice from the PBGC or
any Multiemployer Plan with respect to the withdrawal from, or the termination,
Reorganization or Insolvency of, any Benefit Plan or Multiemployer Plan; and
(h) Concurrently with each delivery of the financial statement
referred to in Section 5.1(a) and Section 5.1(b), if there is any material
-------------- --------------
change in the number of employees of the Borrower as to whom the Borrower is
required to make contributions to a Multiemployer Plan, provide notice to the
Agent of such new number and the change in the aggregate contribution made by
the Borrower to such Plan.
<PAGE>
5.11 Tax-Sharing Agreement. In the event that the affiliated group of
---------------------
which CTN is the common parent for Federal income tax purposes (the "CTN Group")
shall include any Person other than the Borrower, the members of the CTN Group
shall enter into a tax-sharing agreement, in form and substance acceptable to
the Agent, that provides for the payment by such members of their allocable
shares of the CTN Group's Federal income tax liability. Such tax-sharing
agreement shall be amended from time to time as may be necessary to include all
members that join the CTN Group. In addition, to the extent that CTN and
Borrower are members of a consolidated, combined or unitary group for state
income tax purposes that includes any Person other than CTN and the Borrower,
the members of such group shall enter into a similar tax-sharing agreement with
respect to state income taxes, in form and substance acceptable to the Agent,
such agreement to be amended from time to time as may be necessary to include
all members that join such group.
5.12 Post-Closing Actions. On before 10 days after the Closing Date,
--------------------
pay, discharge or otherwise satisfy all tax obligations of the Borrower in
connection with the tax liens referenced in Schedule 3.11, and deliver to to the
-------------
Agent a receipt or other written acknowledgement of such payment and evidence of
termination of the liens imposed in connection therewith.
5.13 Further Assurances. From time to time hereafter, execute and
------------------
deliver, or cause to be executed and delivered, such additional instruments,
certificates or documents, and take all such actions, as the Agent or the
Lenders may reasonably request, for the purposes of implementing or effectuating
the Loan Documents, or of more fully perfecting, preserving or renewing the
rights of the Lenders with respect to the Collateral (or with respect to any
additions thereto or replacements or proceeds thereby or with respect to any
other property or assets hereafter acquired by the Borrower which may be deemed
to be part of the Collateral) pursuant hereto or thereto.
ARTICLE 6. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Note remains outstanding and unpaid or any Obligation is owing to
any Lender or the Agent hereunder, the Borrower shall not:
6.1 Financial Condition Covenants.
-----------------------------
(a) Interest Coverage. On the last day of any fiscal quarter of the
-----------------
Borrower, commencing with the fiscal quarter ending on December 31, 1999, ending
during any period set forth below, permit the Interest Coverage Ratio for the
four fiscal quarter period ending on the last day of such fiscal quarter to be
less than the ratio set forth opposite such period:
<TABLE>
<CAPTION>
Period Interest Coverage Ratio
<S> <C>
Closing Date through March 31, 2000 2.00 to 1.00
</TABLE>
<PAGE>
<TABLE>
<S> <C>
April 1, 2000 through September 30, 2000 2.25 to 1.00
October 1, 2000 through December 31, 2000 2.50 to 1.00
January 1, 2001 and thereafter 3.00 to 1.00
</TABLE>
(b) Fixed Charge Ratio. On the last day of each fiscal quarter of the
------------------
Borrower, commencing with the fiscal quarter ending on September 30, 2000,
permit the Fixed Charge Ratio for the four fiscal quarter period ending on the
last day of such fiscal quarter to be less than 1.10 to 1.0.
(c) Leverage Ratio. Permit the Leverage Ratio during any period to
--------------
exceed the ratio set forth opposite such period below:
<TABLE>
<CAPTION>
Period Leverage Ratio
<S> <C>
January 1, 2000 through June 30, 2000 4.75 to 1.00
July 1, 2000 through September 31, 2000 4.50 to 1.00
October 1, 2000 through December 31, 2000 4.00 to 1.00
January 1, 2001 through June 30, 2001 3.50 to 1.00
July 1, 2001 through December 31, 2001 3.00 to 1.00
January 1, 2002 through September 30, 2002 2.50 to 1.00
October 1, 2002 and thereafter 2.00 to 1.00
</TABLE>
provided that if the Leverage Ratio is less than 3.25 to 1.00 and the Borrower
- --------
shall request that the Corporate Guarantees be released, the applicable Leverage
Ratio shall not exceed 3.25 to 1.00 from the date of such release until July 1,
2001, at which time the Leverage Ratio set forth above for such period and for
subsequent periods shall apply.
(d) Minimum Operating Cash Flow. On the last day of each fiscal
---------------------------
quarter of the Borrower, commencing with the fiscal quarter ending on September
30, 1999, permit the Operating Cash Flow for the twelve-month period ending on
the last day of such fiscal quarter to be less than the amount set forth
opposite such period:
<TABLE>
<CAPTION>
Minimum Operating
Period Cash Flow
------ -----------------
<S> <C>
September 30, 1999 $2,700,000
December 31, 1999 2,900,000
</TABLE>
6.2 Limitation on Indebtedness. Create, incur, assume or suffer to
--------------------------
exist any Indebtedness, or enter into any agreement or binding commitment to
create, incur, assume or suffer any Indebtedness, except:
<PAGE>
(a) Indebtedness under this Agreement, the other Loan Documents or
under any Hedging Agreement; and
(b) Indebtedness of the Borrower (including Financing Leases)
incurred to finance the purchase price of equipment, fixtures and other
similar property of the Borrower in a principal amount not to exceed
$400,000 in any fiscal year and $1,500,000 in the aggregate.
6.3 Limitation on Liens. Create, incur, assume or suffer to exist
-------------------
any Lien upon any of its properties, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) inchoate Liens for taxes, assessments or governmental charges or
levies or Liens for taxes, assessments, governmental charges or levies not
yet due or which are being contested in good faith by appropriate
proceedings; provided that adequate reserves with respect thereto are
--------
maintained on the books of the Borrower, as the case may be, in conformity
with GAAP;
(b) statutory Liens of carriers', warehousemens', mechanics',
materialmens', repairmens' or other similar Liens arising in the ordinary
course of business which are not overdue for a period of more than 60 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; deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements; and deposits to secure true leases in the ordinary course;
(d) (i) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and landlords'
Liens 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 the Borrower and (ii) to the extent not covered by clause (i);
(e) Liens securing Indebtedness permitted under Section 6.2(b)
--------------
(including financing statements filed in connection with Financing Leases
permitted under Section 6.2(b)); provided that such Liens shall extend only
-------------- --------
to the equipment, fixtures and other similar property so financed (and
improvements or attachments thereto) and the proceeds thereof;
(f) any attachment or judgment Lien not constituting an Event of
Default under Section 7.1 (i);
---------------
(g) the interest of any lessor or licensor under any true lease or
license to which the Borrower is permitted to be party under this
Agreement;
<PAGE>
(h) Liens created pursuant to the Security Documents; and
(i) Liens arising from filing UCC financing statements for
precautionary purposes relating solely to true leases of personal property
that are permitted under this Agreement and under which the Borrower is a
lessee.
6.4 Limitation on Guarantee Obligations. Create, incur, assume or
-----------------------------------
suffer to exist any Guarantee Obligation.
6.5 Limitation on Fundamental Changes. Enter into any merger,
---------------------------------
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all its property, business or
assets, or make any material change in its present method of conducting business
(it being understood that nothing contained herein shall limit the ability of
the Borrower to make changes in management personnel).
6.6 Limitation on Sale of Assets. Convey, sell, lease, assign,
----------------------------
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, any Capital Stock, receivables and fee or
leasehold interests), whether now owned or hereafter acquired, or issue any
Capital Stock, in one transaction or a series of transactions to any Person,
except:
(a) the sale or other disposition of obsolete or worn out property in
the ordinary course of business;
(b) the sale or discount without recourse of Accounts arising in the
ordinary course of business in connection with the compromise or collection
thereof;
(c) the sale of assets the Net Disposition Proceeds of which, in the
aggregate, shall not exceed $250,000, provided that such Net Disposition
--------
Proceeds are applied in accordance with Section 2.9(c);
--------------
(d) the trade, exchange or other disposition of equipment for fair
market value; provided that the proceeds thereof shall be applied to
--------
replacement equipment having a value and utility at least equal to such
replaced equipment, in the ordinary course of business;
(e) the sale or other disposition of assets in accordance with
Section 6.5;
-----------
(f) the sale of advertising or services in the ordinary course of
business; and
(g) the issuance of Capital Stock of the Borrower to the extent of
the direct or indirect equity contribution(s) to the Borrower by WSP, UC
Holdings or CTN, which contribution(s) shall be used to make optional
prepayments of principal of the Loans, and
<PAGE>
which prepayments shall be applied, at the election of the Borrower, to any
scheduled installments of principal of the Term Loans or to the Revolving
Credit Loans (with a concomitant reduction in the Revolving Credit
Commitments); provided that any such Capital Stock shall be pledged to the
--------
Agent, for the benefit of the Lenders, pursuant to a Pledge Agreement.
6.7 Limitation on Dividends and other Restricted Payments. (a)
-----------------------------------------------------
Declare or pay any 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 the Borrower 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 the Borrower other than
(i) dividends payable solely in the common stock of the
Borrower;
(ii) distributions to CTN in respect of income taxes in an
amount equal to the lesser of (x) income taxes that would be owed by the
Borrower if it filed on a stand-alone basis (i.e., if it were not
consolidated with CTN) and (y) the income taxes owed by the Borrower on a
consolidated, combined or unitary basis after giving effect to any tax
sharing arrangements required to be in place under Section 5.11;
------------
(iii) distributions to CTN in reimbursement of actual out-of-
pocket expenditures on behalf of the Borrower for insurance, employee
benefits and accounting services;
(iv) distributions to CTN permitted under Section 6.17.
------------
(b) Cancel any material claim or debt or amend or modify the terms
thereof, except in the ordinary course of its business, or voluntarily prepay,
redeem, purchase, repurchase, defease or retire any long-term Indebtedness
(other than the Obligations).
6.8 Limitation on Capital Expenditures. Make or commit to make (by
----------------------------------
way of the acquisition of securities or assets of a Person or otherwise) any
Capital Expenditures (a) from the Closing Date through September 30, 2000, in an
amount exceeding in the aggregate $400,000 and (b) thereafter, in an amount
which after giving effect thereto would cause the Fixed Charge Ratio to be less
than 1.10 to 1.00.
6.9 Limitation on Investments, Loans and Advances. Make any advance,
---------------------------------------------
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities or Capital Stock of or any assets
constituting a business unit of, or make any other investment in, any Person,
except:
<PAGE>
(a) any extension of trade credit in the ordinary course of business
and investments in customer accounts or notes receivable for inventory sold
or services rendered in the ordinary course of business and consistent with
past practice;
(b) any investment in Cash Equivalents;
(c) Capital Expenditures permitted under Section 6.8;
-----------
(d) investments received in connection with the bankruptcy of
suppliers and customers or received pursuant to a plan of reorganization of
any supplier or customer, in each case, in settlement of delinquent
obligations or disputes with such suppliers or customers;
(e) any Hedging Agreement that the Borrower is required to enter into
pursuant to Section 5.9;
-----------
(f) deposits permitted under Section 6.3(c);
--------------
(g) the AF Acquisition; and
(h) Guarantee Obligations, loans and other extensions of credit
permitted by Section 6.2(c).
--------------
6.10 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 a Loan
Party) unless such transaction is (a) (i) otherwise not prohibited under this
Agreement, (ii) in the ordinary course of the Borrower's business and (iii)
upon fair and reasonable terms no less favorable to the Borrower than it would
obtain in a comparable arm's length transaction with a Person which is not an
Affiliate, or (b) pursuant to the Management Agreement.
6.11 Limitation on Sales and Leasebacks. Enter into any arrangement
----------------------------------
with any Person providing for the leasing by the Borrower of real or personal
property which has been or is to be sold or transferred by the Borrower to such
Person or to any other Person to whom funds have been or are to be advanced by
such Person on the security of such property or rental obligations of the
Borrower.
6.12 Limitation on Changes in Fiscal Year. Permit the fiscal year of
------------------------------------
the Borrower to end on a day other than December 31.
6.13 Limitation on Negative Pledge Clauses. Enter into with any
-------------------------------------
Person any agreement, other than (a) this Agreement and the other Loan
Documents, (b) customary provisions in true leases that the Borrower is
permitted to enter under this Agreement limiting assignment or subleasing or (c)
any Lien permitted under or Financing Leases permitted by this
<PAGE>
Agreement (in which case, any prohibition or limitation shall be effective only
against the assets financed thereby), which prohibits or limits the ability of
the Borrower to create, incur, assume or suffer to exist any Lien upon any of
its property, assets or revenues, whether now owned or hereafter acquired.
6.14 Limitation on Lines of Business. Enter into any business, except
-------------------------------
for the placement of advertising targeting military personnel and their
dependents, college students, minority and senior citizens, other promotional
activities focused on these markets and any business substantially related to
any of the foregoing.
6.15 New Subsidiaries. Create or permit to exist any Subsidiary.
----------------
6.16 Amendments to Material Agreements. Enter into or consent to any
---------------------------------
amendment of or waive any rights under any AF Acquisition Document, the
Management Agreement or Material Agreement which restricts or diminishes in any
material respects any right or benefit enjoyed with respect to any of the
foregoing by the Borrower, the Agent or the Lenders or which would adversely
affect the rights of the Agent and the Lenders under the Loan Documents or the
Liens of the Agent and the Lenders created thereby; provided that nothing
--------
contained herein shall restrict the ability of the Borrower to terminate any
Material Agreement which is within 45 days of such termination replaced by an
agreement which is substantially equivalent in all material respects or, in the
case of goods or services provided to the Borrower, the Borrower elects to
perform such services or provide such goods and, if requested by the Agent,
demonstrates that it has the capabilities to perform such services or provide
such goods on a level substantially equivalent to that of the terminated service
provider or goods producer.
6.17 Management Fees. Make payment in respect of, or accrue,
---------------
management fees at any time other than management fees in an amount not to
exceed 2 % of "gross revenues" (as such term is defined in Section 2 of the
Management Agreement) of the Borrower per annum, which fees are subordinated to
the Obligations on terms set forth in the Management Agreement; provided that
--------
(i) such fees shall be paid semiannually on the later to occur of (a)
45 days after each of the first and third fiscal quarters of the Borrower
and (b) the date on which the Agent receives the Compliance Certificate for
such quarter, and after the Agent's receipt, in each case, of (x) financial
statements referred in Section 5.1(b) for such first or third fiscal
--------------
quarter, respectively, and (y) a certificate demonstrating that, after
giving effect to the payment of such fees, (A) the Borrower is in
compliance with the covenants set forth in Section 6.1, (B) on a pro forma
----------- --- -----
basis, the Borrower is in compliance with such covenants for the next
succeeding six months and (C) that the Leverage Ratio of the Borrower is
less than 3.25 to 1.00;
(ii) no fees shall be paid at any time if, after giving effect to any
such payment, a Default would exist; and
<PAGE>
(iii) after the indefeasible payment in full of all the Obligations,
the Borrower may pay any accrued management fees which are to be
subordinated pursuant to the Management Agreement
ARTICLE 7. EVENTS OF DEFAULT
7.1 If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Note of the
Borrower when due in accordance with the terms thereof or hereof; or the
Borrower shall fail to pay any interest on any such Note, or any other
amount payable hereunder, within five days after any such interest or other
amount becomes due in accordance with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by 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 incorrect in any material respect on or
as of the date made or deemed made; or
(c) The Borrower shall default in the observance or performance of
any agreement contained in Article 6, Section 5.1, Section 5.2, Section
--------- ----------- ----------- -------
5.4, Section 5.7 or Section 5.9; or
--- ----------- -----------
(d) CTN shall default in the observance or performance of clause (c)
------ ---
or (d) of Section 5 or Section 9 of the CTN Pledge Agreement; or
--- --------- ---------
(e) Any Loan Party shall default in the observance or performance of
any other agreement contained in this Agreement or any other Loan Document,
and such default shall continue unremedied for a period of 30 days after
the date on which any Loan Party becomes aware or should have become aware
of such default; or
(f) Any Loan Party or any of its Subsidiaries shall (i) default in
any payment (regardless of amount) of principal of or interest on or any
other amount payable in respect of any Indebtedness having an aggregate
principal or notional amount in excess of $500,000 (other than the Notes)
beyond the period of grace (not to exceed 30 days), if any, provided in the
instrument or agreement relating to such Indebtedness or (ii) 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 holders of such Indebtedness (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice, if required, such
Indebtedness to become due prior to its stated maturity; provided that no
--------
Event of Default shall be deemed to have occurred if, prior to any of the
Agent or the Lenders having commenced
<PAGE>
to take any action permitted under this Section 7.1, such default shall
-----------
have been cured or waived; or
(g) (i) The Borrower or any Loan Party shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial
part of its assets, or the Borrower or any Loan Party shall make a general
assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Borrower or any Loan Party any case, proceeding or
other action of a nature referred to in clause (i) above which (A) results
in the entry of an order for relief or any such adjudication or appointment
or (B) remains undismissed, undischarged or unbonded for a period of 60
days; or (iii) there shall be commenced against the Borrower or any Loan
Party 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) the
Borrower or any Loan Party shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts
set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any
Loan Party or any of its 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
(h) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity in an amount in excess of
$100,000, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall
be appointed, to administer or to terminate, any Single Employer Plan,
which Reportable Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Required Lenders, likely to
result in the termination of such Plan for purposes of Title IV of ERISA,
(iv) any Single Employer Plan shall terminate for purposes of Title IV of
ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the
reasonable opinion of the Required Lenders is likely to, incur any
liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan or (vi) any other 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 reasonably be expected to
have a Material Adverse Effect in an amount in excess of $100,000; or
<PAGE>
(i) One or more judgments or decrees shall be entered against the
Borrower or any Loan Party involving in the aggregate a liability (to the
extent not covered by third-party insurance as to which the insurer has
acknowledged coverage) of $250,000 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
(j) (x) Any of the Security Documents shall cease, for any reason, to
be in full force and effect, or the Borrower or any Loan Party which is a
party to any of the Security Documents shall so assert, (y) the 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 (z) the
Agent shall not have, for any reason whatsoever, a valid and perfected
first security interest for the benefit of the Lenders in the Collateral,
subject only to Liens permitted under Section 6.3; or
-----------
(k) Any Corporate Guarantee shall terminate other than in accordance
with its terms, or any Corporate Guarantor shall deny that it has any
further liability, including with respect to future advances by the
Lenders, under such Corporate Guarantee or any Corporate Guarantor gives
notice to such effect; or
(l) A Change of Control shall occur; or
(m) An "event of default" or a "termination event" (as each of such
terms is defined in any Hedging Agreement) shall occur with respect to any
Loan Party; or
(n) (i) any AF Acquisition Document shall cease to be in full force
and effect (other than a termination by its terms and not as a result of a
breach) or any party thereto shall so assert or (ii) any Material Agreement
shall cease to be in full force and effect (other than a termination by its
terms and not as a result of a breach) or any party thereto shall so
assert, if such cessation could reasonably be expected to have a Material
Adverse Effect;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (g) above with respect to any Loan Party,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the Notes shall immediately become due and payable, and (B) if
such event is any other Event of Default, either or both of the following
actions may be taken: (i) with the consent of the Required Lenders, the Agent
may, or upon the request of the Required Lenders, the Agent shall, by notice to
the Borrower declare the Commitments to be terminated forthwith, whereupon the
Commitments shall immediately terminate; and (ii) with the consent of the
Required Lenders, the Agent may, or upon the request of the Required Lenders,
the Agent shall, by notice to the Borrower, declare the Loans hereunder (with
accrued interest thereon) and all other amounts owing under this Agreement and
the Notes to be due and payable forthwith, whereupon the same shall immediately
become due and payable. Except as expressly provided above in this Section,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived.
<PAGE>
ARTICLE 8. THE ADMINISTRATIVE AGENT
8.1 Appointment. Each Lender hereby irrevocably designates and
-----------
appoints Canadian Imperial Bank of Commerce as Agent of such Lender under this
Agreement and the other Loan Documents. Each such Lender irrevocably authorizes
Canadian Imperial Bank of Commerce, as the Agent for such Lender, 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 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
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 Agent.
8.2 Delegation of Duties. The 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 Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
8.3 Exculpatory Provisions. None of the Agent or any of its
----------------------
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or any other Loan Document
(except for its own gross negligence or willful misconduct) or (ii) responsible
in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower, any other Loan Party or any
officer or any of them 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 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 the Notes or any other Loan
Document or for any failure of the Borrower or any other Loan Party to perform
its obligations hereunder or thereunder. The Agents 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 either Parent, the Borrower or any Subsidiary.
8.4 Reliance by Agent. The Agent shall be entitled to rely, and
-----------------
shall be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to either Parent or the Borrower), independent accountants
and other experts selected by
<PAGE>
the Agent. The 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 Agent. The 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 as it deems appropriate or it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
The Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement and the Notes and the other Loan Documents in
accordance with a request of the Required 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 Notes.
8.5 Notice of Default. The Agent shall not be deemed to have
-----------------
knowledge or notice of the occurrence of any Default or Event of Default unless
the Agent has received notice from a Lender or the Borrower 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 Agent receives such a
notice, the Agent shall give notice thereof to the Lenders. The Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders; provided that unless and until the
--------
Agent shall have received such directions, the 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.
8.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly
---------------------------------------
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereafter taken, including any
review of the affairs of any Borrower, shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each Lender represents
to the Agent that it has, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of each
Parent and the Borrower 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 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
Parents and the Borrower. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Agent hereunder or
furnished to the Agent for the account of, or with a counterpart or copy for,
each Lender, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
either Parent, the Borrower or any Subsidiary which may come into the possession
of the Agent or any of its officers, directors, employees, agents, attorneys-in-
fact or Affiliates.
<PAGE>
8.7 Indemnification. The Lenders agree to indemnify the Agent in its
---------------
capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to their
respective Commitment Percentages in effect on the date on which indemnification
is sought under this Section (or, if indemnification is sought after the date
upon which the Commitments shall have terminated and the Loans shall have been
paid in full, ratably in accordance with their Commitment Percentages
immediately prior to such date), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Agent in any way relating to
or arising out of 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 Agent under
or in connection with any of the foregoing; provided that no Lender shall be
--------
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from such the Agent's gross negligence or willful misconduct. The
agreements in this Section shall survive the payment of the Obligations
hereunder.
8.8 Agent in Its Individual Capacity. The Agent and its Affiliates
--------------------------------
may make loans to, accept deposits from and generally engage in any kind of
business with the Borrower as though the Agent were not the Agent hereunder and
under the other Loan Documents. With respect to Loans made or renewed by it and
any Note issued to it, the 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 Agent, and the terms "Lender" and "Lenders" shall
include the Agent in its individual capacity.
8.9 Successor Agent. The Agent may resign as Agent upon ten days'
---------------
notice to the Lenders. If the Agent shall resign or be terminated, as the case
may be, as Agent under this Agreement and the other Loan Documents, then the
Required Lenders shall appoint a successor agent whereupon such successor agent
shall succeed to the rights, powers and duties of the Agent, and the term
"Agent" shall mean such successor agent effective upon such appointment, and the
former Agent's rights, powers and duties as Agent shall be terminated, without
any other or further act or deed on the part of such former Agent or any of the
parties to this Agreement or any holders of the Notes. After any retiring or
terminated Agent's resignation or termination, as the case may be, as Agent, the
provisions of this Section shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement and the other
Loan Documents.
ARTICLE 9. MISCELLANEOUS
9.1 Amendments and Waivers. Neither this Agreement, any Note or 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. The Required Lenders may, or, with
<PAGE>
the written consent of the Required Lenders, the Agent may, from time to time,
(a) enter into with the Borrower written amendments, supplements or
modifications hereto for the purpose of adding any provisions to this Agreement
or changing in any manner the rights of the Lenders or of the Borrower
hereunder; (b) enter into with the Borrower written amendments, supplements or
modifications to the Note and the other Loan Documents for the purpose of adding
provisions to the Notes or such other Loan Documents or changing in any manner
the rights of the Lenders or the Borrower thereunder or (c) waive, on such terms
and conditions as the Required Lenders or the Agent, as the case may be, may
specify in such instrument, any of the requirements of this Agreement, the Notes
or the other Loan Documents or any Default or Event of Default and its
consequences; provided that no such waiver and no such amendment, supplement or
--------
modification (i) shall increase the amount or extend the expiration date of any
Lender's Commitment without the consent of such Lender, (ii) shall reduce the
amount of any scheduled amortization, (iii) shall reduce the amount or extend
the scheduled date of maturity of any Note or of any installment thereof, or
reduce the stated rate of any interest or fee payable hereunder or extend the
scheduled date of any payment thereof, in each case, without the consent of all
the Lenders, (iv) shall amend or modify any other provision of this Agreement or
any other Loan Document which specifically by its terms requires the approval or
consent of all the Lenders, or reduce the percentage specified in the definition
of Required Lenders, or consent to the assignment or transfer by the Borrower or
any other Loan Party of any of its rights and obligations under this Agreement,
the Notes and the other Loan Documents, or terminate any Corporate Guarantee, or
release all or any substantial portion of the Collateral, in each case, without
the written consent of all the Lenders, or (v) shall amend, modify or waive any
provision of Article 8 without the written consent of the then Agent. Any such
---------
waiver and any such amendment, supplement or modification shall apply equally to
each of the Lenders and shall be binding upon the Loan Parties, the Lenders, the
Agent and all future holders of the Notes. In the case of any waiver, the Loan
Parties, the Lenders and the Agent shall be restored to their former position
and rights hereunder and under the outstanding Notes and any 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.
9.2 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 by hand, or, in the case of notice
by mail, when received, or, in the case of telecopy notice, when received,
addressed as follows in the case of the Borrower and the Agent, and as set forth
in Schedule I in the case of the other parties hereto, or to such other address
as may be hereafter notified by the respective parties hereto and any future
holders of the Notes:
The Borrower: Armed Forces Communications, Inc.
26 Castilian Drive
Goleta, California 92117
Attention: Andrew Sawyer
Telecopy: 805-968-8003
<PAGE>
With copies to: Morris, Manning & Martin
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326-1044
Attention: Neil Dickson, Esq.
Telecopy: 404-365-9532
and Willis Stein & Partners
227 West Monroe Street
Suite 4300
Chicago, Illinois 60606
Attention: Dan Gill
Telecopy: 312-422-2418
and Morris, Manning & Martin
3343 Peachtree Road, N.E.
1600 Atlanta Financial Center
Atlanta, Georgia 30326
Attention: Neil H. Dickson, Esq.
Telecopy: 404-365-9532
The Administrative Canadian Imperial Bank of Commerce
Agent: 425 Lexington Avenue
New York, New York 10017
Attention: Colleen Risorto
Telecopy: (212) 856-3558
provided that any notice, request or demand to or upon the Agent or the
- --------
Lenders pursuant to Section 2.3, Section 2.5, Section 2.8, Section 2.9, Section
----------- ----------- ----------- ----------- -------
2.10 or Section 2.15 shall not be effective until received.
- ---- ------------
9.3 No Waiver; Cumulative Remedies. No failure to exercise and no
------------------------------
delay in exercising, on the part of the 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.
9.4 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 Notes and the
making of the Loans hereunder.
<PAGE>
9.5 Payment of Expenses and Taxes; Indemnification. The Borrower
----------------------------------------------
agrees (a) to pay or reimburse the Agent for all its reasonable 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,
the Notes 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
fees and disbursements of counsel to the Agent, (b) to pay or reimburse each
Lender and the Agent for all its costs and expenses incurred in connection with
the enforcement or preservation of any rights under this Agreement, the Notes,
the other Loan Documents and any such other documents, including, without
limitation, the fees and disbursements of counsel to the Agent and to each
Lender, and (c) to pay, and indemnify and hold harmless each Lender and the
Agent from, any and all recording and filing fees and any and all liabilities
with respect to, or resulting from any delay in paying, stamp, excise 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 Notes,
the other Loan Documents and any such other documents, and (d) to pay, and
indemnify and hold harmless each Lender and the Agent and each of their
respective parents, subsidiaries and affiliates (and including each of their
respective officers, directors, employees and agents) from and against, any and
all other claims, demands, liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, settlements, expenses or disbursements of
whatever kind or nature arising from, in connection with or with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement, the Notes, the other Loan Documents, the AF Acquisition Documents or
any other documents or the use of the proceeds of the Loans in connection with
the AF Acquisition or any other purpose (all the foregoing in this clause (d),
collectively, the "indemnified liabilities"); provided that the Borrower shall
--------
not have any obligation hereunder to the Agent or any Lender with respect to
indemnified liabilities arising from the gross negligence or willful misconduct
of the Agent or such Lender. The agreements in this Section 9.5 shall survive
-----------
repayment of the Obligations hereunder.
9.6 Successors and Assigns; Participations and Assignments. (a)
------------------------------------------------------
This Agreement shall be binding upon and inure to the benefit of the Borrower,
the Lenders, the Agent, all future holders of the Notes and their respective
successors and assigns, except that the Borrower shall not assign or transfer
any of its rights or obligations under this Agreement without the prior written
consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or more
banks or other entities ("Participants") participating interests in any Loan
------------
owing to such Lender, any Note held by 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 Note for all
<PAGE>
purposes under this Agreement and the other Loan Documents, and the Borrower and
the 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
thereunder, or postpone the date of the final maturity of the Loans, in each
case to the extent subject to such participation. The Borrower agrees that if
amounts outstanding under this Agreement and the Notes 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 be deemed to have the
right of setoff in respect of its participating interest in amounts owing under
this Agreement and any Note to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement or any Note; provided that, in purchasing such participating interest,
--------
such Participant shall be deemed to have agreed to share with the Lenders the
proceeds thereof as provided in Section 9.7(a) as fully as if it were a Lender
--------------
hereunder. The Borrower also agrees that each Participant shall be entitled to
the benefits of Section 2.17, Section 2.18 and Section 2.19 with respect to its
------------ ------------ ------------
participation in the Commitments and the Loans outstanding from time to time as
if it were a Lender; provided that, in the case of Section 2.18, 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 may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time and from time to
time assign to any Lender or any affiliate thereof or, with the consent of the
Agent, to an additional bank or financial institution (an "Assignee") all or any
--------
part of its rights and obligations under this Agreement and the Notes pursuant
to a Commitment Transfer Supplement, substantially in the form of Exhibit O,
---------
executed by such Assignee, such assigning Lender and, in the case of an Assignee
that is not then a Lender or an affiliate thereof, by the Borrower and the Agent
and delivered to the Agent for its acceptance and recording in the Register;
provided that any such assignment must be in a minimal amount equal to the
lesser of (A) $2,000,000 and (B) the aggregate Commitments of such Lender then
in effect. Upon such execution, delivery, acceptance and recording, from and
after the effective date determined pursuant to such Commitment Transfer
Supplement, (1) the Assignee thereunder shall be a party hereto and, to the
extent provided in such Commitment Transfer Supplement, have the rights and
obligations of a Lender hereunder with a Commitment as set forth therein and (2)
the assigning Lender thereunder, to the extent provided in such Commitment
Transfer Supplement, shall be released from its obligations under this Agreement
(and, in the case of a Commitment Transfer Supplement covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such assigning Lender shall cease to be a party hereto; provided that
--------
the provisions of Section 2.17, Section 2.18, Section 2.19 and Section 9.5 shall
------------ ------------ ------------ -----------
continue to benefit such assigning Lender to the extent required by such
Sections).
<PAGE>
(d) The Agent shall maintain, at its address referred to in Section
-------
9.2, a copy of each Commitment Transfer Supplement delivered to it and a
- ---
register (the "Register") for the recordation of the names and addresses of the
--------
Lenders and the Commitments of, and principal 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 Borrower, the Agent and the Lenders may
treat each Person whose name is recorded in the Register as the owner of the
Loan recorded therein for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(e) Upon its receipt of a Commitment Transfer Supplement executed by
an assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof, by the Borrower and the Agent) together
with payment to the Agent of a registration and processing fee of $3,500, the
Agent shall promptly accept such Commitment Transfer Supplement and, on the
effective date determined pursuant thereto, shall record the information
contained therein in the Register and give notice of such acceptance and
recordation to the Lenders and the Borrower. On or prior to such effective
date, the Borrower, at its own expense, shall execute and deliver to the Agent
(in exchange for the Revolving Credit Note or Term Note of the assigning Lender
marked "Canceled") a new Revolving Credit Note or Term Note, as the case may be,
to the order of such Assignee in an amount equal to the Revolving Credit
Commitment or Term Loan, as the case may be, assumed by such Assignee pursuant
to such Commitment Transfer Supplement and, if the assigning Lender has retained
a Revolving Credit Commitment or Term Loan hereunder, a new Revolving Credit
Note or Term Note, as the case may be, to the order of the assigning Lender in
an amount equal to the Revolving Credit Commitment or Term Note, as the case may
be, retained by it hereunder. Such new Notes shall be dated the Closing Date
and shall otherwise be in the form of the Notes replaced thereby.
(f) The Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "Transferee") and any prospective Transferee,
----------
any and all financial information in such Lender's possession concerning the
Borrower and its Affiliates which has been delivered to such Lender by or on
behalf of the Borrower pursuant to this Agreement or which has been delivered to
such Lender by or on behalf of the Borrower in connection with such Lender's
credit evaluation of the Borrower and its Affiliates prior to becoming a party
to this Agreement.
(g) Nothing herein shall prohibit any Lender from pledging or
assigning any Note to any Federal Reserve Bank in accordance with applicable
law.
9.7 Adjustments; Setoff. (a) If any Lender (a "Benefited Lender")
------------------- ----------------
shall at any time receive any payment of all or part of its Loans, or interest
thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by setoff, pursuant to events or proceedings of the nature
referred to in Section 7.1(g), 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 interest thereon, such benefited Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Loans, or shall provide such other Lenders
with the benefits of any such collateral, or the proceeds thereof, as
<PAGE>
shall be necessary to cause such benefited Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Lenders;
provided that if all or any portion of such excess payment or benefits is
- --------
thereafter recovered from such benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to the Borrower, any
such notice being expressly waived by the Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by the Borrower
hereunder or under the Notes (whether at the stated maturity, by acceleration or
otherwise) to setoff and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of the Borrower. Each Lender agrees
promptly to notify the Borrower and the 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.
9.8 Limitation on Agreements. All agreements between the Borrower
------------------------
and the Agent or any Lender, whether now existing or hereafter arising, are
hereby expressly limited so that in no contingency or event whatsoever, whether
by reason or demand being made on the Notes or otherwise, shall the amount paid,
or agreed to be paid, to the Agent or any Lender for the use, forbearance, or
detention of the money to be loaned under this Agreement or otherwise or for the
payment or performance of any covenant or obligation contained herein or in any
other Loan Document exceed the maximum amount permissible under applicable law.
If, as a result of any circumstances whatsoever, fulfillment of any provision
hereof or of any of such documents, at the time performance of such provision
shall be due, shall involve exceeding the limit of validity prescribed by
applicable usury law, then, ipso facto, the obligation to be fulfilled shall be
reduced to the limit of validity, and if, from any such circumstance, the Agent
or any Lender shall ever receive interest or anything which might be deemed
interest under applicable law which would exceed the highest lawful rate, such
amount which would be excessive interest shall be applied to the reduction of
the principal amount owing on account of the Notes or the amount owing on other
obligations of the Borrower to the Agent or any Lender under the Loan Documents
and not to the payment of interest. All sums paid or agree to be paid to the
Agent or any Lender for the use, forbearance or detention of the indebtedness of
the Borrower to the Agent or any Lender shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
term of such indebtedness until payment in full of the principal (including the
period of any renewal or extension thereof) so that the interest on account of
such indebtedness shall not exceed the maximum amount permitted by applicable
law. The terms and provisions of this Section 9.8 shall control and supersede
-----------
every other provision of all agreements between the Borrower and the Agent and
any Lender.
9.9 Effectiveness. This Agreement and each of the other Loan
-------------
Documents shall be construed to the extent reasonable to be consistent with the
other, but to the extent that
<PAGE>
the terms and conditions of this Agreement are actually inconsistent with the
terms and conditions of any other Loan Document, this Agreement shall govern.
This Agreement shall become effective on the date when counterparts hereof
executed on behalf of the Borrower and each Lender shall have been received by
the Agent and notice thereof shall have been given by the Agent to the Borrower
and each Lender.
9.10 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 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 each of the Borrower and the
Agent.
9.11 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.
9.12 Integration. This Agreement and the other Loan Documents
-----------
represent the agreement of the Borrower, the Agent and the Lenders with respect
to the subject matter hereof and thereof, and there are no promises,
undertakings, representations or warranties by the Agent or any Lender relative
to subject matter hereof or thereof not expressly set forth or referred to
herein or in the other Loan Documents.
9.13 Governing Law. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF OTHER THAN
SECTION 5-1401 OF THE GENERAL OBLIGATIVE LAW OF THE STATE OF NEW YORK.
9.14 Submission To Jurisdiction; Waivers. The Borrower 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;
<PAGE>
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in Section 9.2 or at such other address
-----------
of which the Agent shall have been notified pursuant thereto;
(d) agrees that nothing contained herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section any special, exemplary, punitive or consequential damages.
9.15 Acknowledgments. The Borrower hereby acknowledges that:
---------------
(a) neither the Agent nor any Lender has any fiduciary relationship
with or duty to the Borrower arising out of or in connection with this
Agreement or any of the other Loan Documents, and the relationship between
the Agent and the Lenders, on the one hand, and the Borrower, on the other
hand, in connection herewith or therewith is solely that of creditor and
debtor; and
(b) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among the Borrower and the Lenders.
9.16 Waivers of Jury Trial. THE BORROWER, 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 THE NOTES OR ANY
OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
ARMED FORCES COMMUNICATIONS, INC.
By: /s/ Martin Grant
-----------------------------
Name: Martin Grant
Title: Vice President
CANADIAN IMPERIAL BANK OF COMMERCE, as Agent
By: /s/ Colleen Risorto
-----------------------------
Name: Colleen Risorto
Title: Executive Director
CIBC WORLD MARKETS CORP., as Arranger
By: /s/ Colleen Risorto
-----------------------------
Name: Colleen Risorto
Title: Executive Director
LENDERS:
-------
CIBC INC.
By: /s/ Colleen Risorto
-----------------------------
Name: Colleen Risorto
Title: Executive Director
<PAGE>
EXECUTION COPY
--------------
GUARANTY
Dated as of August 31, 1999
from
COLLEGE TELEVISION NETWORK, INC.,
as Guarantor,
-- ---------
in favor of
CANADIAN IMPERIAL BANK OF COMMERCE,
as Agent
-- -----
and
THE LENDERS PARTY TO THE CREDIT AGREEMENT
REFERRED TO HEREIN
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Definitions.................................................... 1
SECTION 2. Guaranty....................................................... 1
SECTION 3. Guaranty Absolute.............................................. 2
SECTION 4. Reinstatement.................................................. 3
SECTION 5. Waivers........................................................ 4
SECTION 6. Payments....................................................... 4
SECTION 7. Representations and Warranties................................. 4
SECTION 8. Affirmative Covenants.......................................... 7
SECTION 9. Negative Covenants............................................. 9
SECTION 10. Amendments, Etc................................................ 10
SECTION 11. Notices, Etc................................................... 10
SECTION 12. No Waiver; Remedies............................................ 10
SECTION 13. Right of Set-off............................................... 10
SECTION 14. Continuing Guaranty; Assignments Under the Credit Agreement.... 10
SECTION 15. Governing Law.................................................. 11
</TABLE>
<PAGE>
GUARANTY
GUARANTY dated as of August 31, 1999 made by COLLEGE TELEVISION
NETWORK, INC., a Delaware corporation (the "Guarantor"), in favor of the lenders
---------
(the "Lenders") party to the Credit Agreement (as hereinafter defined) and
-------
CANADIAN IMPERIAL BANK OF COMMERCE, as agent (together with any successor agent
appointed pursuant to Article 8 of the Credit Agreement (as defined below), the
"Agent") for the Lenders.
-----
PRELIMINARY STATEMENT. The Lenders and the Agent have entered into a
Credit Agreement dated as of August 31, 1999 (such Agreement, as it may
hereafter be amended, supplemented or otherwise modified from time to time, the
"Credit Agreement") with Armed Force Communications, Inc., a New York
----------------
corporation doing business as Market Place Media and, immediately after the AF
Acquisition, a direct, wholly owned subsidiary of the Guarantor (the
"Borrower"). It is a condition precedent to the making of Loans by the Lenders
--------
under the Credit Agreement that the Guarantor, as owner of 100% of the
outstanding shares of Capital Stock of the Borrower, shall have executed and
delivered this Guaranty.
NOW, THEREFORE and in consideration of the premises and other
consideration, the receipt and sufficiency of which are hereby acknowledged in
order to induce the Lenders to make Loans under the Credit Agreement, the
Guarantor, intending to be legally bound, hereby agrees as follows:
SECTION 1. Definitions. As used in this Guaranty, terms defined in
-----------
the Credit Agreement and not otherwise defined herein shall have the meanings
set forth in the Credit Agreement and the following terms shall have the
following meanings:
"Effective Leverage Ratio" shall mean, as of any date of determination, the
------------------------
ratio of (a) the excess of (i) Funded Debt over (ii) $5,000,000, divided by (b)
---- ----------
Operating Cash Flow, for the four fiscal quarters then most recently ended.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
-----------------------
business, operations, property, condition (financial or otherwise) or prospects
of the Borrower or any Corporate Guarantor, (b) the ability of the Guarantor
to perform its obligations under any Loan Document to which it is a party or
(c) the validity or enforceability of this Guarantee or any other Loan
Document, the Liens created hereunder or thereunder or the rights or remedies
of the Agent or the Lenders hereunder or thereunder.
SECTION 2. Guaranty. The Guarantor hereby unconditionally guarantees
--------
the punctual payment when due, whether at stated maturity, by acceleration or
otherwise, of all Obligations of the Borrower now or hereafter existing under
the Loan Documents, whether for principal, interest, fees, expenses or otherwise
(such Obligations being the "Guaranteed Obligations"), and agrees to pay any and
----------------------
all expenses (including, without limitation, counsel fees
<PAGE>
and expenses) incurred by the Agent or the Lenders in enforcing any rights under
this Guaranty; provided that
--------
(a) the Guaranteed Obligations and the liability of the Guarantor
hereunder, together with that of the other Corporate Guarantors under
their respective Corporate Guarantees, shall not exceed in the
aggregate $6,000,000, as such amount may be further reduced pursuant
to Section 14;
----------
(b) the Agent shall not seek payment under this Guaranty other than
(i) upon the occurrence and during the continuance of an Event of
Default described in Section 7.1(a) or Section 7.1(g) of the
Credit Agreement; or
(ii) at any time upon the Agent's or the Lender's acceleration of
payment obligations under the Credit Agreement or commencement
of the exercise of remedies by the Agent on behalf of the
Lenders in respect of any Event of Default.
(c) the Guarantor shall be liable hereunder only to the extent and to the
amount that WSP shall make a direct or indirect equity investment in
the Guarantor after the date hereof; provided that nothing contained
--------
herein shall require the Agent or any Lender to inquire as to the
source of any payment hereunder and the Guarantor and any party
claiming through or on behalf of the Guarantor shall have no right to
assert any claim as to the source of any payment.
SECTION 3. Guaranty Absolute. The Guarantor guarantees that the
-----------------
Guaranteed Obligations will be paid strictly in accordance with the terms of the
Loan Documents and Section 2 of this Guaranty, regardless of any law, regulation
---------
or order now or hereafter in effect in any jurisdiction affecting any of such
terms or the rights of the Agent or the Lenders with respect thereto. The
Obligations of the Guarantor under this Guaranty are independent of the
Guaranteed Obligations, and a separate action or actions may be brought and
prosecuted against the Guarantor to enforce this Guaranty, irrespective of
whether any action is brought against the Borrower or whether the Borrower is
joined in any such action or actions. The liability of the Guarantor under this
Guaranty shall be absolute and unconditional irrespective of, and the Guarantor
hereby irrevocably waives any defenses it may now or hereafter have in any way
relating to, any and all of the following:
(i) any lack of validity or enforceability of any Loan Document or any
agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Guaranteed Obligations, or any other amendment or
waiver of or any consent to departure from any Loan Document, including, without
limitation, any increase in the Guaranteed Obligations resulting from the
extension of additional credit to the Borrower or otherwise;
<PAGE>
(iii) any taking, exchange, release or nonperfection of any Collateral, or
any taking, release, amendment or waiver of or consent to departure from any
other guaranty, for all or any of the Guaranteed Obligations;
(iv) any manner of application of Collateral, or proceeds thereof, to all
or any of the Guaranteed Obligations, or any manner of sale or other disposition
of any Collateral for all or any of the Guaranteed Obligations or any other
assets of the Borrower;
(v) any change, restructuring or termination of the corporate structure
or existence of the Borrower; or
(vi) any other circumstance (including, without limitation, any statute of
limitations or any existence of or reliance on any representation by the Agent
or any Lender) that might otherwise constitute a defense available to, or a
discharge of, the Borrower or a guarantor, other than payment in full in cash of
the Guaranteed Obligations.
SECTION 4. Reinstatement. The Guarantor agrees that this Guaranty
--------------
(including, without limitation, Section 2 of this Guaranty) shall continue to be
---------
effective or be reinstated, as the case may be, if at any time, all or any
portion of any payment (whether in respect of principal, interest, fees, costs,
expenses or other amounts payable under this Guaranty, any Note or any other
Loan Document), is rescinded or must otherwise be restored by the Agent, any
Lender or the holder of any Note upon the bankruptcy or reorganization of the
Borrower or otherwise. For so long as any of the Obligations of the Borrower
shall remain outstanding or any Commitments shall remain in effect:
(a) all rights of the Guarantor against the Borrower, whether arising
as a result of rights of subrogation or otherwise, shall in all respects be
subordinate and junior in right of payment to the prior indefeasible
payment in full of all the Obligations to the Agent, the Lenders and other
holders of Notes, and, in the event the Guarantor receives any payment
prior to such indefeasible payment in full, the Guarantor shall receive
such payment in trust for, and shall immediately turn over all amounts to,
the Agent for application to the payment of such Obligations;
(b) until the 367th day after the Obligations are paid in full, the
Guarantor shall refrain from taking any action or commencing any proceeding
against the Borrower (or its successors or assigns, whether in connection
with a bankruptcy proceeding or otherwise) to recover any amounts in
respect of payments made under this Guaranty to the Agent, any Lender or
any holder of any Note; and
(c) until the 367th day after the Obligations are paid in full, the
Guarantor hereby waives any claim, right or remedy which the Guarantor may
now have or may hereafter acquire against the Borrower that arises
hereunder and/or from the performance by the
<PAGE>
Guarantor hereunder including, without limitation, any claim, remedy or
right of subrogation, reimbursement, exoneration, contribution,
indemnification or participation in any claim, right or remedy of the
Lenders or the Agent against the Borrower or any security which the Lenders
or the Agent now have or hereafter acquire, whether or not such claim,
right or remedy arises in equity, under contract, by statute, under common
law or otherwise.
SECTION 5. Waivers. (a) The Guarantor hereby waives promptness,
-------
diligence, notice of acceptance and any other notice with respect to any of the
Guaranteed Obligations and this Guaranty and any requirement that the Agent or
any Lender protect, secure, perfect or insure any Lien or any property subject
thereto or exhaust any right or take any action against the Borrower, any other
Corporate Guarantor or any other Person or any Collateral.
(b) Each of the Guarantor and the Agent, on behalf of itself and the
Lenders, hereby irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to any of the Loan Documents or any of the
transactions contemplated thereby, or the actions of the Agent or any Lender in
the negotiation, administration, performance or enforcement thereof.
(c) The Guarantor hereby irrevocably waives any duty on the part of the
Agent or any Lender to disclose to the Guarantor any matter, fact or thing
relating to the business, operation or condition of the Borrower and its assets
now or hereafter known by the Agent or any Lender.
SECTION 6. Payments. Any and all payments made by the Guarantor
--------
hereunder shall be made without setoff or counterclaim.
SECTION 7. Representations and Warranties. The Guarantor hereby
------------------------------
represents and warrants as follows:
(a) The Guarantor (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
power and authority, 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, except to the extent that the failure to comply therewith could
not, in the aggregate, reasonably be expected to have a Material Adverse Effect
and (d) is in compliance with all Requirements of Law except to the extent that
the failure to comply therewith could not reasonably be expected to have a
Material Adverse Effect.
(b) The Guarantor has the power and authority, and the legal right, to
make, deliver and perform this Guaranty and each of the other Loan Documents to
which it is a party and to authorize the execution, delivery and performance of
this Guaranty and each of the other Loan
<PAGE>
Documents to which it is a party. Except as set forth on Schedule 7(b), no
-------------
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required to be
obtained in connection with the execution, delivery, performance, validity or
enforceability of this Guaranty, the other Loan Documents and the AF Acquisition
Documents to which the Guarantor, the Borrower or any other Loan Party is a
party, except to the extent that failure to obtain or perform such consent,
authorization, notice or other act individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect. This Guaranty has
been, and each other Loan Document to which the Guarantor, the Borrower or any
other Loan Party is a party will be, duly executed and delivered on behalf of
the Guarantor, the Borrower or such other Loan Party. This Guaranty constitutes,
and each other Loan Document to which the Guarantor is a party when executed and
delivered will constitute, a legal, valid and binding obligation of the
Guarantor, enforceable against the Guarantor in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
(c) The execution, delivery and performance of this Guaranty and each of
the other Loan Documents to which the Guarantor is a party, will not violate any
Requirement of Law or Contractual Obligation of the Guarantor, will not
accelerate or result in the acceleration of any payment obligations of the
Guarantor and will not result in, or require, the creation or imposition of any
Lien on any of the properties or revenues of the Guarantor pursuant to any such
Requirement of Law or Contractual Obligation other than as contemplated by the
Security Documents, except to the extent that such violation or Lien
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect.
(d) The Guarantor has, independently and without reliance upon the Lender
or the Agent and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Guaranty.
(e) The Guarantor is not 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.
(f) The Guarantor is not a "holding company", a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended. The
Guarantor is not an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended. The Guarantor is not subject to regulation under any Federal or
state statute, regulation, decree or order which limits its ability to incur
Indebtedness or conditions such ability upon any act, approval or consent of any
Governmental Authority (including, without limitation, the Small Business
Investment Company Act of 1958, as amended).
<PAGE>
(g) After giving effect to the AF Acquisition and to the borrowings under
the Credit Agreement to be made on the Closing Date or such other date as Loans
requested thereunder are made, the Guarantor is Solvent.
(h) The audited balance sheet of the Guarantor as of October 31, 1997 and
December 31, 1998 and the related statements of income and changes in
stockholders equity for the fiscal years ended on such dates, reported on by
PricewaterhouseCoopers LLP, true, complete and correct copies of which have
heretofore been furnished to each Lender, present fairly in all material
respects the financial condition of the Guarantor as at such dates and the
results of its operations and stockholders' equity for each of the fiscal years
then ended. The unaudited balance sheet of the Guarantor as at June 30, 1999 and
the related unaudited statements of income for the six-month period ended on
such date, certified by a Responsible Officer of the Guarantor, copies of which
have heretofore been furnished to each Lender, present fairly in all material
respects the financial condition of the Guarantor at such date and the results
of its operations for the six-month period then ended (subject to normal year-
end audit adjustments). All such financial statements, including the related
schedules and notes thereto relating to the audited financial statements, have
been prepared in accordance with GAAP, except that such unaudited statements
lack footnotes and other presentation items, applied consistently throughout the
periods involved (except as approved by such accountants or Responsible Officer,
as the case may be, and as disclosed therein).
(i) All information, reports and other papers and data (other than
projections) with respect to the Guarantor, UC Holdings or the Borrower (in each
case, prior to and after giving effect to the AF Acquisition), taken as a whole,
furnished to the Lenders by the Guarantor, UC Holdings or the Borrower, or on
behalf of the Guarantor, UC Holdings or the Borrower, were, at the time
furnished, complete and correct in all material respects, or have been
subsequently supplemented by other information, reports or other papers or data,
to the extent necessary to give the Lenders a true and accurate knowledge of the
subject matter in all material respects. All projections with respect to the
Guarantor, UC Holdings or the Borrower, furnished by the Guarantor, UC Holdings
or the Borrower, were prepared and presented in good faith by the Guarantor, UC
Holdings and the Borrower based upon facts and assumptions that the Guarantor,
UC Holdings and the Borrower believe to be reasonable in light of current and
foreseeable conditions. No document furnished or statement made in writing to
the Lenders by or on behalf of the Guarantor, UC Holdings or the Borrower in
connection with the negotiation, preparation or execution of this Guaranty
contains any untrue statement of a material fact, or omits to state any such
material fact necessary in order to make the statements contained therein not
misleading, in either case which has not been corrected, supplemented or
remedied by subsequent documents furnished or statements made in writing to the
Lenders. There is no fact known to the Guarantor, UC Holdings or the Borrower
which has, or could reasonably be expected to have, a Material Adverse Effect.
(j) The Guarantor has filed or caused to be filed all Federal, state,
local and foreign income tax returns and all other material tax returns
(including information returns) which are required to be filed and has paid all
taxes shown to be due and payable on said returns or on
<PAGE>
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 tax, fee or other charge the amount or validity of
which is 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 the Guarantor; and no tax Lien has been filed (except for any such Lien
permitted under Section 6.3(a) of the Credit Agreement) and, no claim has been
--------------
or is being asserted against the Guarantor in writing or, to the knowledge of
the taxpayer, otherwise, with respect to any such tax, fee or other charge.
SECTION 8. Affirmative Covenants. The Guarantor covenants and agrees
---------------------
that, subject to Section 14, so long as any part of the Guaranteed Obligations
----------
shall remain unpaid or any Lender shall have any Commitment under the Credit
Agreement, the Guarantor will:
(a) Payment of Obligations. Pay, discharge or otherwise satisfy at or
----------------------
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, 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 Guarantor.
(b) Maintenance of Existence. Renew and keep in full force and effect its
------------------------
corporate existence, take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of its
business except to the extent such failure to maintain could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect and comply,
in all material respects, with all Contractual Obligations and Requirements of
Law.
(c) Performance of AF Acquisition Documents. (i) Perform and observe all
---------------------------------------
of the terms and provisions of each AF Acquisition Document to be performed or
observed by it, maintain each such AF Acquisition Document in full force and
effect and enforce each such AF Acquisition Document in accordance with its
terms, in each case except to the extent that the failure to so act could not
adversely affect the interest or rights of the Borrower or of the Agent or the
Lenders in any manner (it being acknowledged by the Guarantor that a change in
any financial or payment terms of any such AF Acquisition Document could
adversely affect such interest or rights), and take all such action to such end
as may be from time to time reasonably requested by the Agent and (ii) upon the
reasonable request of the Agent, make to each other party to each such AF
Acquisition Document such demands and requests for information and reports or
for action as the Guarantor is entitled to make under such AF Acquisition
Document.
(d) Financial Statements. Furnish to each Lender:
--------------------
(i) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Guarantor, a copy of the balance sheet of
the Guarantor as at the end of such year and the related statements of
income, stockholders equity and cash flows for such year, setting forth in
each case in comparative form the figures as of the end of and for the
<PAGE>
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, together with a
consolidating balance sheet and consolidating statements of income and cash
flows of the Guarantor, reviewed by PricewaterhouseCoopers LLP or such
other independent certified public accountants; provided that the
--------
submission of the Borrower's report on Form 10-K shall satisfy the
foregoing requirements;
(ii) as soon as available, but in any event not later than 45 days
after the end of each quarterly period of the Guarantor, the unaudited
balance sheet of the Guarantor as at the end of such quarter and the
related unaudited statements of income and cash flows of the Guarantor for
such quarter and the portion of the fiscal year through the end of such
quarter and setting forth in each case in comparative form the figures from
the budget for such fiscal year furnished to the Lenders pursuant to
Section 8(f) and the actual figures for the corresponding date or period in
------------
the previous year, certified by a Responsible Officer as being fairly
stated in all material respects (subject to normal year-end audit
adjustments and the absence of footnotes); provided that submission of the
--------
Borrower's report on Form 10-Q shall satisfy the foregoing requirements;
and
(iii) as soon as available, but in any event not later than 30 days
after the end of each calendar month of the Guarantor, the regularly
prepared unaudited income statements of the Guarantor as at the end of 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
comparable period from the budget for such fiscal year furnished to the
Lenders pursuant to Section 8(f) and the actual figures for the
------------
corresponding date or period in 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 as approved by such accountants or officer, as the case may be,
and disclosed therein and except as to the unaudited statements subject to year-
end adjustments and the absence of footnotes).
(e) Tax-Sharing Agreement. In the event that the affiliated group of which
---------------------
the Guarantor is the common parent for Federal income tax purposes (the "CTN
Group") shall include any Person other than the Borrower, the members of the CTN
Group shall enter into a tax-sharing agreement, in form and substance acceptable
to the Agent, that provides for the payment by such members of their allocable
shares of the CTN Group's Federal income tax liability. Such tax-sharing
agreement shall be amended from time to time as may be necessary to include all
members that join the CTN Group. In addition, to the extent that the Guarantor
and the Borrower are members of a consolidated, combined or unitary group for
state income tax purposes that includes any Person other than the Guarantor and
the Borrower, the members of such group shall enter into a similar tax-sharing
agreement with respect to state income
<PAGE>
taxes, in form and substance acceptable to the Agent, such agreement to be
amended from time to time as may be necessary to include all members that join
such group.
(f) Budget. Not later than 30 days after the end of each fiscal year of
------
the Guarantor, the Guarantor will cause to be furnished to each Lender a copy of
the projections by the Guarantor of the operating budget and cash flow budget of
the Guarantor for the succeeding fiscal year set forth on a monthly basis, such
projections to be accompanied by a certificate of a Responsible Officer to the
effect that such projections have been prepared on the basis of sound financial
planning practices and that such Responsible Officer has no reason to believe
that such projections are incorrect or misleading in any material respect.
SECTION 9. Negative Covenants. The Guarantor covenants and agrees
------------------
that, subject to Section 14, so long as any part of the Guaranteed Obligations
----------
shall remain unpaid or any Lender shall have any Commitment under the Credit
Agreement, the Guarantor will not:
(a) Liens, Etc. Create, incur, assume or suffer to exist any Lien on or
----------
with respect to any of its properties of any character (including, without
limitation, accounts), whether now owned or hereafter acquired, or sign or file
under the Uniform Commercial Code of any jurisdiction a financing statement that
names the Guarantor as debtor, or sign any security agreement authorizing any
secured party thereunder to file such financing statement, or assign any
accounts or other right to receive income, excluding, however, from the
--------- -------
operation of the foregoing restrictions Liens permitted under the CTN Credit
Agreement or consented to by LaSalle Bank.
(b) Indebtedness. Create, incur, assume or suffer to exist any
------------
Indebtedness other than Indebtedness permitted under the CTN Credit Agreement or
consented to by LaSalle Bank.
(c) Limitation on Fundamental Changes. Enter into any merger,
---------------------------------
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign,
transfer or otherwise dispose of, all or substantially all its property,
business or assets.
(d) Amendments to Material Agreements. (i) Enter into or consent to any
---------------------------------
amendment of or waive any rights under any AF Acquisition Document or any other
agreement, instrument, certificate or other document executed in connection
therewith which restricts or diminishes in any material respects any right or
benefit enjoyed with respect to any of the foregoing by the Loan Parties, the
Agent or the Lenders or which could adversely affect the rights of the Agent and
the Lenders under the Loan Documents or the Liens of the Agent and the Lenders
created thereby.
(ii) Enter into or consent to any amendment of or waive any rights under
any provision of the CTN Credit Agreement or any other agreement, instrument,
certificate or other document executed in connection therewith which relates to
the Borrower or its business,
<PAGE>
which individually or in the aggregate restricts or diminishes in any material
respects any right or benefit enjoyed with respect to any such provision by the
Borrower, the Agent or the Lenders or which could adversely affect the rights of
the Agent and the Lenders under the Loan Documents or the Liens of the Agent and
the Lenders created thereby.
SECTION 10. Amendments, Etc. No amendment or waiver of any provision
---------------
of this Guaranty, and no consent to any departure by the Guarantor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Guarantor, the Agent and the Required Lenders, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 11. Notices, Etc. All notices, requests and demands to or
------------
upon the Guarantor or the Agent or any Lender to be effective shall be in
writing or by telegraph or telex and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when delivered by hand,
or, in the case of mail, three days after deposit in the postal system, first
class postage prepaid, or, in the case of telegraphic notice, when sent,
answerback received, addressed to a party at the address provided for such party
on Schedule I or set forth under its signature below, as the case may be.
----------
SECTION 12. No Waiver; Remedies. No failure on the part of the Agent
-------------------
or any Lender to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof or consent thereto; nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
SECTION 13. Right of Set-off. In the event that any amounts are owed
----------------
under this Guarantee, each Lender is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set-off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by such Lender to or for the
credit or the account of the Guarantor against any and all the obligations of
the Guarantor now or hereafter existing under this Guaranty, whether or not such
Lender shall have made any demand under this Guaranty and although such
obligations may be unmatured. Each Lender agrees promptly to notify the
Guarantor after any such set-off and application made by such Lender; provided
--------
that the failure to give such notice shall not affect the validity of such set-
off and application. The rights of each Lender under this Section 13 are in
----------
addition to other rights and remedies (including, without limitation, other
rights of set-off) that such Lender may have.
SECTION 14. Continuing Guaranty; Assignments Under the Credit
-------------------------------------------------
Agreement. (a) Subject to Sections 14(b) and 14(c), this Guaranty is a
- --------- -------------- -----
continuing guaranty and shall (i) remain in full force and effect until the
later of (x) the payment in full in cash of the Guaranteed Obligations and all
other amounts payable under this Guaranty and (y) the Revolving Credit
Commitment Termination Date, (ii) be binding upon the Guarantor, its successors
and assigns and (iii) inure to the benefit of, and be enforceable by, the Agent,
the Lenders and their
<PAGE>
respective successors, transferees and assigns. Without limiting the generality
of the foregoing clause (iii), any Lender may assign or otherwise transfer all
or any portion of its rights and obligations under the Credit Agreement
(including, without limitation, all or any portion of its Commitment or
Commitments, the payments owing to it and the Note or Notes held by it) to any
other Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Lender, herein or otherwise, in each
case as provided in Article 9 of the Credit Agreement.
---------
(b) The Guarantor's liability hereunder and the amount referred to in
Section 2(a) shall be reduced (i) to $5,000,000 in the aggregate upon the
- ------------
Borrower's demonstration to the reasonable satisfaction of the Agent that the
Effective Leverage Ratio is less than 3.00 to 1.00 (computed as of the most
recently completed fiscal quarter) ; and (ii) from time to time by an amount
equal to the amount of any direct or indirect equity contribution(s) to the
Borrower made from time to time by WSP, UC Holdings or the Guarantor; provided
--------
that the Guarantor's liability hereunder and the amount referred to in Section
-------
2(a) shall be reduced solely to the extent to which such equity contribution(s)
- ----
shall have been used to make optional prepayments of principal of the Loans, and
which prepayments shall be applied, at the election of the Borrower, to any
scheduled installments of principal of the Term Loans or to the Revolving Credit
Loans (with a concommitant reduction in the Revolving Credit Commitments).
(c) This Guarantee shall terminate, and none of the Guarantor, the Agent
or the Lenders shall have any further rights or obligations hereunder, upon the
Borrower's demonstration to the reasonable satisfaction of the Agent that the
Leverage Ratio is less than 3.25 to 1.00 (computed as of the most recently
completed fiscal quarter).
SECTION 15. Governing Law. This Guaranty shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
COLLEGE TELEVISION NETWORK, INC.
By: /s/ Martin Grant
--------------------------------
Name: Martin Grant
Title: President
Address for notice:
College Television Network, Inc.
5784 Lake Forrest Drive
Suite 275
Atlanta, Georgia 30328
Attn: Jason Elkin, Chief Executive Officer
Telecopy: 404-257-9517
ACKNOWLEDGED AND AGREED:
CANADIAN IMPERIAL BANK OF COMMERCE, as Agent
By: /s/ Colleen Risorto
--------------------------
Name: Colleen Risorto
Title: Executive Director
<PAGE>
EXECUTION COPY
--------------
GUARANTY
Dated as of August 31, 1999
from
U-C HOLDINGS, L.L.C.,
as Guarantor,
-- ---------
in favor of
CANADIAN IMPERIAL BANK OF COMMERCE,
as Agent
-- -----
and
THE LENDERS PARTY TO THE CREDIT AGREEMENT
REFERRED TO HEREIN
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Definitions..................................................... 1
SECTION 2. Guaranty........................................................ 1
SECTION 3. Guaranty Absolute............................................... 2
SECTION 4. Reinstatement................................................... 3
SECTION 5. Waivers......................................................... 4
SECTION 6. Payments........................................................ 4
SECTION 7. Representations and Warranties.................................. 4
SECTION 8. Affirmative Covenants........................................... 6
SECTION 9. Amendments, Etc................................................. 7
SECTION 10. Notices, Etc.................................................... 8
SECTION 11. No Waiver; Remedies............................................. 8
SECTION 12. Right of Set-off................................................ 8
SECTION 13. Continuing Guaranty; Assignments Under the Credit Agreement..... 8
SECTION 14. Governing Law................................................... 9
</TABLE>
<PAGE>
GUARANTY
GUARANTY dated as of August 31, 1999 made by U-C HOLDINGS, L.L.C., a
Delaware limited liability company (the "Guarantor"), in favor of the lenders
---------
(the "Lenders") party to the Credit Agreement (as hereinafter defined) and
-------
CANADIAN IMPERIAL BANK OF COMMERCE, as agent (together with any successor agent
appointed pursuant to Article 8 of the Credit Agreement (as defined below), the
"Agent") for the Lenders.
-----
PRELIMINARY STATEMENT. The Lenders and the Agent have entered into a
Credit Agreement dated as of August 31, 1999 (such Agreement, as it may
hereafter be amended, supplemented or otherwise modified from time to time, the
"Credit Agreement") with Armed Force Communications, Inc., a New York
----------------
corporation doing business as Market Place Media and, immediately after the AF
Acquisition, a direct, wholly owned subsidiary of CTN (the "Borrower"). It is a
--------
condition precedent to the making of Loans by the Lenders under the Credit
Agreement that the Guarantor, as owner of greater than 75% of the outstanding
shares of Capital Stock of CTN, shall have executed and delivered this Guaranty.
NOW, THEREFORE and in consideration of the premises and other
consideration, the receipt and sufficiency of which are hereby acknowledged in
order to induce the Lenders to make Loans under the Credit Agreement, the
Guarantor, intending to be legally bound, hereby agrees as follows:
SECTION 1. Definitions. As used in this Guaranty, terms defined in
-----------
the Credit Agreement and not otherwise defined herein shall have the meanings
set forth in the Credit Agreement) and the following terms shall have the
following meanings:
"Effective Leverage Ratio" shall mean, as of any date of determination, the
------------------------
ratio of (a) the excess of (i) Funded Debt over (ii) $5,000,000, divided by (b)
---- ----------
Operating Cash Flow, for the four fiscal quarters then most recently ended.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
-----------------------
business, operations, property, condition (financial or otherwise) or prospects
of the Borrower or any Corporate Guarantor, (b) the ability of the Guarantor to
perform its obligations under any Loan Document to which it is a party or (c)
the validity or enforceability of this Guarantee or any other Loan Document, the
Liens created hereunder or thereunder or the rights or remedies of the Agent or
the Lenders hereunder or thereunder.
SECTION 2. Guaranty. The Guarantor hereby unconditionally guarantees
--------
the punctual payment when due, whether at stated maturity, by acceleration or
otherwise, of all Obligations of the Borrower now or hereafter existing under
the Loan Documents, whether for principal, interest, fees, expenses or otherwise
(such Obligations being the "Guaranteed Obligations"), and agrees to pay any and
----------------------
all expenses (including, without limitation, counsel fees
<PAGE>
and expenses) incurred by the Agent or the Lenders in enforcing any rights under
this Guaranty; provided that
--------
(a) the Guaranteed Obligations and the liability of the Guarantor
hereunder, together with that of the other Corporate Guarantors under
their respective Corporate Guarantees, shall not exceed in the
aggregate $6,000,000, as such amount may be further reduced pursuant
to Section 13;
----------
(b) the Agent shall not seek payment under this Guaranty other than
(i) upon the occurrence and during the continuance of an Event of
Default described in Section 7.1(a) or Section 7.1(g) of the
Credit Agreement; or
(ii) at any time upon the Agent's or the Lender's acceleration of
payment obligations under the Credit Agreement or commencement of
the exercise of remedies by the Agent on behalf of the Lenders in
respect of any Event of Default.
(c) the Guarantor shall be liable hereunder only to the extent that WSP
shall make a direct or indirect equity investment in the Guarantor
after the date hereof; provided that nothing contained herein shall
--------
require the Agent or any Lender to inquire as to the source of any
payment hereunder and the Guarantor and any party claiming through or
on behalf of the Guarantor shall have no right to assert any claim as
to the source of any payment.
SECTION 3. Guaranty Absolute. The Guarantor guarantees that the
-----------------
Guaranteed Obligations will be paid strictly in accordance with the terms of the
Loan Documents and Section 2 of this Guaranty, regardless of any law, regulation
---------
or order now or hereafter in effect in any jurisdiction affecting any of such
terms or the rights of the Agent or the Lenders with respect thereto. The
Obligations of the Guarantor under this Guaranty are independent of the
Guaranteed Obligations, and a separate action or actions may be brought and
prosecuted against the Guarantor to enforce this Guaranty, irrespective of
whether any action is brought against the Borrower or whether the Borrower is
joined in any such action or actions. The liability of the Guarantor under this
Guaranty shall be absolute and unconditional irrespective of, and the Guarantor
hereby irrevocably waives any defenses it may now or hereafter have in any way
relating to, any and all of the following:
(i) any lack of validity or enforceability of any Loan Document or any
agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Guaranteed Obligations, or any other amendment or
waiver of or any consent to departure from any Loan Document, including, without
limitation, any increase in the
<PAGE>
Guaranteed Obligations resulting from the extension of additional credit to the
Borrower or otherwise;
(iii) any taking, exchange, release or nonperfection of any Collateral, or
any taking, release, amendment or waiver of or consent to departure from any
other guaranty, for all or any of the Guaranteed Obligations;
(iv) any manner of application of Collateral, or proceeds thereof, to all
or any of the Guaranteed Obligations, or any manner of sale or other disposition
of any Collateral for all or any of the Guaranteed Obligations or any other
assets of the Borrower;
(v) any change, restructuring or termination of the corporate structure
or existence of the Borrower; or
(vi) any other circumstance (including, without limitation, any statute of
limitations or any existence of or reliance on any representation by the Agent
or any Lender) that might otherwise constitute a defense available to, or a
discharge of, the Borrower or a guarantor, other than payment in full in cash of
the Guaranteed Obligations.
SECTION 4. Reinstatement. The Guarantor agrees that this Guaranty
--------------
(including, without limitation, Section 2 of this Guaranty) shall continue to be
---------
effective or be reinstated, as the case may be, if at any time, all or any
portion of any payment (whether in respect of principal, interest, fees, costs,
expenses or other amounts payable under this Guaranty, any Note or any other
Loan Document), is rescinded or must otherwise be restored by the Agent, any
Lender or the holder of any Note upon the bankruptcy or reorganization of the
Borrower or otherwise. For so long as any of the Obligations of the Borrower
shall remain outstanding or any Commitments shall remain in effect:
(a) all rights of the Guarantor against the Borrower, whether arising
as a result of rights of subrogation or otherwise, shall in all respects be
subordinate and junior in right of payment to the prior indefeasible payment in
full of all the Obligations to the Agent, the Lenders and other holders of
Notes, and, in the event the Guarantor receives any payment prior to such
indefeasible payment in full, the Guarantor shall receive such payment in trust
for, and shall immediately turn over all amounts to, the Agent for application
to the payment of such Obligations;
(b) the Guarantor shall refrain from taking any action or commencing
any proceeding against the Borrower (or its successors or assigns, whether in
connection with a bankruptcy proceeding or otherwise) to recover any amounts in
respect of payments made under this Guaranty to the Agent, any Lender or any
holder of any Note; and
<PAGE>
(c) the Guarantor hereby waives any claim, right or remedy which the
Guarantor may now have or may hereafter acquire against the Borrower that arises
hereunder and/or from the performance by the Guarantor hereunder including,
without limitation, any claim, remedy or right of subrogation, reimbursement,
exoneration, contribution, indemnification or participation in any claim, right
or remedy of the Lenders or the Agent against the Borrower or any security which
the Lenders or the Agent now have or hereafter acquire, whether or not such
claim, right or remedy arises in equity, under contract, by statute, under
common law or otherwise.
SECTION 5. Waivers. (a) The Guarantor hereby waives promptness,
-------
diligence, notice of acceptance and any other notice with respect to any of the
Guaranteed Obligations and this Guaranty and any requirement that the Agent or
any Lender protect, secure, perfect or insure any Lien or any property subject
thereto or exhaust any right or take any action against the Borrower, any other
Corporate Guarantor or any other Person or any Collateral.
(b) Each of the Guarantor and the Agent, on behalf of itself and the
Lenders, hereby irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to any of the Loan Documents or any of the
transactions contemplated thereby, or the actions of the Agent or any Lender in
the negotiation, administration, performance or enforcement thereof.
(c) The Guarantor hereby irrevocably waives any duty on the part of the
Agent or any Lender to disclose to the Guarantor any matter, fact or thing
relating to the business, operation or condition of the Borrower and its assets
now or hereafter known by the Agent or any Lender.
SECTION 6. Payments. Any and all payments made by the Guarantor
--------
hereunder shall be made without setoff or counterclaim.
SECTION 7. Representations and Warranties. The Guarantor hereby
------------------------------
represents and warrants as follows:
(a) The Guarantor (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
power and authority, 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, except to the extent that the failure to comply therewith could
not, in the aggregate, reasonably be expected to have a Material Adverse Effect
and (d) is in compliance with all Requirements of Law except to the extent that
the failure to comply therewith could not reasonably be expected to have a
Material Adverse Effect.
(b) The Guarantor has the power and authority, and the legal right, to
make, deliver and perform this Guaranty and each of the other Loan Documents to
which it is a party and to
<PAGE>
authorize the execution, delivery and performance of this Guaranty and each of
the other Loan Documents to which it is a party. Except as set forth on Schedule
--------
7(b), 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 execution, delivery, performance, validity or enforceability
of this Guaranty, the other Loan Documents and the AF Acquisition Documents to
which the Guarantor, the Borrower or any other Loan Party is a party, except to
the extent that failure to obtain or perform such consent, authorization, notice
or other act individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect. This Guaranty has been, and each other Loan
Document to which the Guarantor, the Borrower or any other Loan Party is a party
will be, duly executed and delivered on behalf of the Guarantor, the Borrower or
such other Loan Party. This Guaranty constitutes, and each other Loan Document
to which the Guarantor is a party when executed and delivered will constitute, a
legal, valid and binding obligation of the Guarantor, enforceable against the
Guarantor in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
(c) The execution, delivery and performance of this Guaranty and each of
the other Loan Documents to which the Guarantor is a party, will not violate any
Requirement of Law or Contractual Obligation of the Guarantor, will not
accelerate or result in the acceleration of any payment obligations of the
Guarantor and will not result in, or require, the creation or imposition of any
Lien on any of the properties or revenues of the Guarantor pursuant to any such
Requirement of Law or Contractual Obligation other than as contemplated by the
Security Documents, except to the extent that such violation or Lien
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect.
(d) The Guarantor has, independently and without reliance upon the Lender
or the Agent and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Guaranty.
(e) The Guarantor is not 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.
(f) The Guarantor is not a "holding company", a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended. The
Guarantor is not an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended. The Guarantor is not subject to regulation under any Federal or
state statute, regulation, decree or order which limits its ability to incur
Indebtedness or conditions such ability upon any act, approval or consent of any
Governmental Authority (including, without limitation, the Small Business
Investment Company Act of 1958, as amended).
<PAGE>
(g) After giving effect to the AF Acquisition and to the borrowings under
the Credit Agreement to be made on the Closing Date or such other date as Loans
requested thereunder are made, the Guarantor is Solvent.
(h) The Guarantor has not prepared, as of the date hereof, any financial
statements.
(i) All information, reports and other papers and data (other than
projections) with respect to the Guarantor, CTN or the Borrower (in each case,
prior to and after giving effect to the AF Acquisition), taken as a whole,
furnished to the Lenders by the Guarantor, CTN or the Borrower, or on behalf of
the Guarantor, CTN or the Borrower, were, at the time furnished, complete and
correct in all material respects, or have been subsequently supplemented by
other information, reports or other papers or data, to the extent necessary to
give the Lenders a true and accurate knowledge of the subject matter in all
material respects. All projections with respect to the Guarantor, CTN or the
Borrower, furnished by the Guarantor, CTN or the Borrower, were prepared and
presented in good faith by the Guarantor, CTN and the Borrower based upon facts
and assumptions that the Guarantor, CTN and the Borrower believe to be
reasonable in light of current and foreseeable conditions. No document furnished
or statement made in writing to the Lenders by or on behalf of the Guarantor,
CTN or the Borrower in connection with the negotiation, preparation or execution
of this Guaranty contains any untrue statement of a material fact, or omits to
state any such material fact necessary in order to make the statements contained
therein not misleading, in either case which has not been corrected,
supplemented or remedied by subsequent documents furnished or statements made in
writing to the Lenders. There is no fact known to the Guarantor, CTN or the
Borrower which has, or could reasonably be expected to have, a Material Adverse
Effect.
(j) The Guarantor has filed or caused to be filed all Federal, state,
local and foreign income tax returns and all other material tax returns
(including information 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 tax, fee or other charge the amount or validity of which is 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 the
Guarantor; and no tax Lien has been filed (except for any such Lien permitted
under Section 6.3(a) of the Credit Agreement), and, no claim has been or is
--------------
being asserted against the Guarantor in writing or, to the knowledge of the
taxpayer, otherwise, with respect to any such tax, fee or other charge.
SECTION 8. Affirmative Covenants. The Guarantor covenants and agrees
---------------------
that, subject to Section 13, so long as any part of the Guaranteed Obligations
----------
shall remain unpaid or any Lender shall have any Commitment under the Credit
Agreement, the Guarantor will:
(a) Financial Statements. Promptly upon the production of financial
--------------------
statements of the Guarantor, solely to the extent actually produced, notify the
Agent of such production, and thereafter furnish to each Lender:
<PAGE>
(i) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Guarantor and solely to the extent actually
produced, a copy of the balance sheet of the Guarantor as at the end of
such year and the related statements of income, stockholders equity and
cash flows for such year, setting forth in each case in comparative form
the figures as of the end of and for the previous year, reported on without
a "going concern" or like qualification or exception, or qualification
arising out of the scope of the audit, by PricewaterhouseCoopers LLP or
other independent certified public accountants of nationally recognized
standing, together with a consolidating balance sheet and consolidating
statements of income and cash flows of the Guarantor, reviewed by
PricewaterhouseCoopers LLP or such other independent certified public
accountants;
(ii) as soon as available, but in any event not later than 45 days
after the end of each quarterly period of the Guarantor and solely to the
extent actually produced, the unaudited balance sheet of the Guarantor as
at the end of such quarter and the related unaudited statements of income
and cash flows of the Guarantor for such quarter and the portion of the
fiscal year through the end of such quarter and setting forth in each case
in comparative form the figures from the budget for such fiscal year, also
furnished to the Lenders (solely to the extent actually produced), and the
actual figures for the corresponding date or period in the previous year,
certified by a Responsible Officer as being fairly stated in all material
respects (subject to normal year-end audit adjustments); and
(iii) as soon as available, but in any event not later than 30 days
after the end of each calendar month of the Guarantor and solely to the
extent actually produced, the regularly prepared unaudited income
statements of the Guarantor as at the end of 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 comparable period from the budget
for such fiscal year, also furnished to the Lenders (solely to the extent
actually produced), and the actual figures for the corresponding date or
period in 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 as approved by such accountants or officer, as the case may be,
and disclosed therein and except as to the unaudited statements subject to year-
end adjustments and the absence of footnotes).
SECTION 9. Amendments, Etc. No amendment or waiver of any provision
---------------
of this Guaranty, and no consent to any departure by the Guarantor herefrom,
shall in any event be
<PAGE>
effective unless the same shall be in writing and signed by the Guarantor, the
Agent and the Required Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 10. Notices, Etc. All notices, requests and demands to or
------------
upon the Guarantor or the Agent or any Lender to be effective shall be in
writing or by telegraph or telex and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when delivered by hand,
or, in the case of mail, three days after deposit in the postal system, first
class postage prepaid, or, in the case of telegraphic notice, when sent,
answerback received, addressed to a party at the address provided for such party
on Schedule I or set forth under its signature below, as the case may be.
SECTION 11. No Waiver; Remedies. No failure on the part of the Agent
-------------------
or any Lender to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof or consent thereto; nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
SECTION 12. Right of Set-off. In the event that any amounts are owed
----------------
under this Guarantee, each Lender is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set-off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by such Lender to or for the
credit or the account of the Guarantor against any and all the obligations of
the Guarantor now or hereafter existing under this Guaranty, whether or not such
Lender shall have made any demand under this Guaranty and although such
obligations may be unmatured. Each Lender agrees promptly to notify the
Guarantor after any such set-off and application made by such Lender; provided
--------
that the failure to give such notice shall not affect the validity of such set-
off and application. The rights of each Lender under this Section 12 are in
----------
addition to other rights and remedies (including, without limitation, other
rights of set-off) that such Lender may have.
SECTION 13. Continuing Guaranty; Assignments Under the Credit
-------------------------------------------------
Agreement. (a) Subject to Sections 13(b) and 13(c), this Guaranty is a
- --------- -------------- -----
continuing guaranty and shall (i) remain in full force and effect until the
later of (x) the payment in full in cash of the Guaranteed Obligations and all
other amounts payable under this Guaranty and (y) the Revolving Credit
Commitment Termination Date, (ii) be binding upon the Guarantor, its successors
and assigns and (iii) inure to the benefit of, and be enforceable by, the Agent,
the Lenders and their respective successors, transferees and assigns. Without
limiting the generality of the foregoing clause (iii), any Lender may assign or
otherwise transfer all or any portion of its rights and obligations under the
Credit Agreement (including, without limitation, all or any portion of its
Commitment or Commitments, the payments owing to it and the Note or Notes held
by it) to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to such Lender, herein or
otherwise, in each case as provided in Article 9 of the Credit Agreement.
---------
<PAGE>
(b) The Guarantor's liability hereunder and the amount referred to in
Section 2(a) shall be reduced (i) to $5,000,000 in the aggregate upon the
- ------------
Borrower's demonstration to the reasonable satisfaction of the Agent that the
Effective Leverage Ratio is less than 3.00 to 1.00 (computed as of the most
recently completed fiscal quarter); and (ii) from time to time by an amount
equal to the amount of any direct or indirect equity contribution(s) to the
Borrower made from time to time by WSP, the Guarantor or CTN; provided that the
--------
Guarantor's liability hereunder and the amount referred to in Section 2(a)
------------
shall be reduced solely to the extent to which such equity contribution(s)
shall have been used to make optional prepayments of principal of the Loans,
and which prepayments shall be applied, at the election of the Borrower, to any
scheduled installments of principal of the Term Loans or to the Revolving
Credit Loans (with a concommitant reduction in the Revolving Credit
Commitments).
(c) This Guarantee shall terminate, and none of the Guarantor, the Agent
or the Lenders shall have any further rights or obligations hereunder, upon the
Borrower's demonstration to the reasonable satisfaction of the Agent that the
Leverage Ratio is less than 3.25 to 1.00 (computed as of the most recently
completed fiscal quarter).
SECTION 14. Governing Law. This Guaranty shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
U-C HOLDINGS, L.L.C.
By: WILLIS STEIN & PARTNERS, L.P., its
Managing Member
By: WILLIS STEIN & PARTNERS, L.L.C., its
General Partner
By: /s/ Daniel M. Gill
--------------------------------
Name: Daniel M. Gill
Title: Managing Director
Address for notice:
U-C Holdings, L.L.C.
c/o Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Margaret A. Gibson, Esq.
Telecopy: 312-861-2200
<PAGE>
EXECUTION COPY
--------------
GUARANTY
Dated as of August 31, 1999
from
WILLIS STEIN & PARTNERS II, L.P.
and
WILLIS STEIN & PARTNERS DUTCH, L.P.,
as Guarantors,
-- ----------
in favor of
CANADIAN IMPERIAL BANK OF COMMERCE,
as Agent
-- -----
and
THE LENDERS PARTY TO THE CREDIT AGREEMENT
REFERRED TO HEREIN
-1-
<PAGE>
T A B L E O F C O N T E N T S
-------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. Definitions..................................................... 3
SECTION 2. Guaranty........................................................ 3
SECTION 3. Guaranty Absolute............................................... 4
SECTION 4. Reinstatement................................................... 5
SECTION 5. Waivers......................................................... 6
SECTION 6. Payments........................................................ 6
SECTION 7. Representations and Warranties.................................. 6
SECTION 8. Amendments, Etc................................................. 8
SECTION 9. Notices, Etc.................................................... 8
SECTION 10. No Waiver; Remedies............................................. 8
SECTION 11. Continuing Guaranty; Assignments Under the Credit Agreement..... 9
SECTION 13. Governing Law................................................... 9
</TABLE>
-2-
<PAGE>
GUARANTY
GUARANTY dated as of August 31, 1999 made by WILLIS STEIN & PARTNERS
II, L.P., a Delaware limited partnership ("WSP II"), and WILLIS STEIN & PARTNERS
------
DUTCH, L.P., a Delaware limited partnership ("WSP Dutch"; together with WSP II,
---------
the "Guarantors"), in favor of the lenders (the "Lenders") party to the Credit
---------- -------
Agreement (as hereinafter defined) and CANADIAN IMPERIAL BANK OF COMMERCE, as
agent (together with any successor agent appointed pursuant to Article 8 of the
Credit Agreement (as defined below), the "Agent") for the Lenders.
-----
PRELIMINARY STATEMENT. The Lenders and the Agent have entered into a
Credit Agreement dated as of August 31, 1999 (such Agreement, as it may
hereafter be amended, supplemented or otherwise modified from time to time, the
"Credit Agreement") with Armed Force Communications, Inc., a New York
----------------
corporation doing business as Market Place Media and, immediately after the AF
Acquisition, an indirect subsidiary of UC Holdings (the "Borrower"). It is a
--------
condition precedent to the making of Loans by the Lenders under the Credit
Agreement that the Guarantors shall have executed and delivered this Guaranty.
NOW, THEREFORE and in consideration of the premises and other
consideration, the receipt and sufficiency of which are hereby acknowledged in
order to induce the Lenders to make Loans under the Credit Agreement, each of
the Guarantors, intending to be legally bound, hereby agrees as follows:
SECTION 1. Definitions. As used in this Guaranty, terms not
-----------
otherwise defined herein shall have the meanings set forth in Exhibit A and the
---------
following terms shall have the following meanings:
"Effective Leverage Ratio" shall mean, as of any date of determination, the
------------------------
ratio of (a) the excess of (i) Funded Debt over (ii) $5,000,000, divided by (b)
---- ----------
Operating Cash Flow, for the four fiscal quarters then most recently ended.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
-----------------------
business, operations, property, condition (financial or otherwise) or prospects
of either Guarantor, (b) the ability of each of the Guarantors to perform its
obligations under this Guaranty or (c) the validity or enforceability of this
Guaranty or the rights or remedies of the Agent or the Lenders hereunder.
SECTION 2. Guaranty. Each Guarantor hereby severally (and not
--------
jointly) and unconditionally guarantees its Pro Rata Share (as defined below) of
the punctual payment when due, whether at stated maturity, by acceleration or
otherwise, of all Obligations of the Borrower now or hereafter existing under
the Loan Documents, whether for principal, interest, fees, expenses or otherwise
(such Obligations being the "Guaranteed Obligations"), and agrees to pay
----------------------
-3-
<PAGE>
any and all expenses (including, without limitation, counsel fees and expenses)
incurred by the Agent or the Lenders in enforcing any rights under this
Guaranty; provided that
--------
(a) the Guaranteed Obligations and the liability of the Guarantors
hereunder, together with that of the other Corporate Guarantors under
their respective Corporate Guarantees, shall not exceed in the
aggregate $6,000,000, as such amount may be further reduced pursuant
to Section 11; and
----------
(b) the Agent shall not seek payment under this Guaranty other than
(i) upon the occurrence and during the continuance of an Event of
Default described in Section 7.1(a), or Section 7.1(g) of the
--------------
Credit Agreement; or
(ii) at any time upon the Agent's or the Lenders' acceleration of
payment obligations under the Credit Agreement or commencement of
the exercise of remedies by the Agent on behalf of the Lenders in
respect of any Event of Default;
provided that the Agent or Lenders (a) shall have previously made demand
--------
for payment under the Parent Guarantees with a copy to the Guarantors and
payment shall not have been made within 15 Business Days after such demand
or (b) shall be precluded by any Requirement of Law from making such
demand.
Notwithstanding anything contained herein to the contrary, the liability of WSP
II and WSP Dutch hereunder with respect to the Guaranteed Obligations and other
amounts payable hereunder shall be several and not joint and several, such that
WSP II shall only be liable for 95.19% of any such amounts and WSP Dutch shall
only be liable for 4.81% of such amounts (each such Guarantor's "Pro Rata
--------
Share"). The Agent, on behalf of itself and each of the Lenders hereby agrees
- -----
that in no event shall either Guarantor be responsible for more than its Pro
Rata Share of any such amounts.
SECTION 3. Guaranty Absolute. Each of the Guarantors severally, based
-----------------
on its Pro Rata Share (and not jointly), guarantees that the Guaranteed
Obligations will be paid strictly in accordance with the terms of the Loan
Documents and Section 2 of this Guaranty, regardless of any law, regulation or
---------
order now or hereafter in effect in any jurisdiction affecting any of such terms
or the rights of the Agent or the Lenders with respect thereto. The Obligations
of each of the Guarantors under this Guaranty are independent of the Guaranteed
Obligations, and a separate action or actions may be brought and prosecuted
against the Guarantors to enforce this Guaranty, irrespective of whether any
action is brought against the Borrower or whether the Borrower is joined in any
such action or actions. The liability of the Guarantors under this Guaranty
shall be absolute and unconditional irrespective of, and each of the Guarantor
hereby irrevocably waives any defenses it may now or hereafter have in any way
relating to, any and all of the following:
-4-
<PAGE>
(i) any lack of validity or enforceability of any Loan Document or any
agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other amendment
or waiver of or any consent to departure from any Loan Document, including,
without limitation, any increase in the Guaranteed Obligations resulting from
the extension of additional credit to the Borrower or otherwise;
(iii) any taking, exchange, release or nonperfection of any Collateral, or
any taking, release, amendment or waiver of or consent to departure from any
other guaranty, for all or any of the Guaranteed Obligations;
(iv) any manner of application of Collateral, or proceeds thereof, to all
or any of the Guaranteed Obligations, or any manner of sale or other disposition
of any Collateral for all or any of the Guaranteed Obligations or any other
assets of the Borrower;
(v) any change, restructuring or termination of the corporate structure
or existence of the Borrower; or
(vi) any other circumstance (including, without limitation, any statute of
limitations or any existence of or reliance on any representation by the Agent
or any Lender) that might otherwise constitute a defense available to, or a
discharge of, the Borrower or a guarantor, other than payment in full in cash of
the Guaranteed Obligations.
SECTION 4. Reinstatement. Each of the Guarantors agrees that this
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Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time, all or any portion of any payment (whether in respect of principal,
interest, fees, costs, expenses or other amounts payable under this Guaranty,
any Note or any other Loan Document), is rescinded or must otherwise be restored
by the Agent, any Lender or the holder of any Note upon the bankruptcy or
reorganization of the Borrower or otherwise. For so long as any of the
Obligations of the Borrower shall remain outstanding or any Commitments shall
remain in effect:
(a) all rights of each Guarantor against the Borrower, whether
arising as a result of rights of subrogation or otherwise, shall in all
respects be subordinate and junior in right of payment to the prior
indefeasible payment in full of all the Obligations to the Agent, the
Lenders and other holders of Notes, and, in the event either Guarantor
receives any payment prior to such indefeasible payment in full, such
Guarantor shall receive such payment in trust for, and shall immediately
turn over all amounts to, the Agent for application to the payment of such
Obligations;
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<PAGE>
(b) each of the Guarantors shall refrain from taking any action or
commencing any proceeding against the Borrower (or its successors or
assigns, whether in connection with a bankruptcy proceeding or otherwise)
to recover any amounts in respect of payments made under this Guaranty to
the Agent, any Lender or any holder of any Note; and
(c) each of the Guarantor hereby waives any claim, right or remedy
which such Guarantor may now have or may hereafter acquire against the
Borrower that arises hereunder and/or from the performance by such
Guarantor hereunder including, without limitation, any claim, remedy or
right of subrogation, reimbursement, exoneration, contribution,
indemnification or participation in any claim, right or remedy of the
Lenders or the Agent against the Borrower or any security which the Lenders
or the Agent now have or hereafter acquire, whether or not such claim,
right or remedy arises in equity, under contract, by statute, under common
law or otherwise.
SECTION 5. Waivers. (a) Each of the Guarantors hereby waives
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promptness, diligence, notice of acceptance and any other notice with respect to
any of the Guaranteed Obligations and this Guaranty and any requirement that the
Agent or any Lender protect, secure, perfect or insure any Lien or any property
subject thereto or exhaust any right or take any action against the Borrower,
any other Corporate Guarantor or any other Person or any Collateral, except
insofar as any action may be required against the other Corporate Guarantors
pursuant to Section 2(b).
------------
(b) Each of the Guarantors and the Agent, on behalf of itself and the
Lenders, hereby irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to any of the Loan Documents or any of the
transactions contemplated thereby, or the actions of the Agent or any Lender in
the negotiation, administration, performance or enforcement thereof.
(c) Each of the Guarantors hereby irrevocably waives any duty on the part
of the Agent or any Lender to disclose to either Guarantor any matter, fact or
thing relating to the business, operation or condition of the Borrower and its
assets now or hereafter known by the Agent or any Lender.
SECTION 6. Payments. Any and all payments made by either of the
--------
Guarantors hereunder shall be made without setoff or counterclaim.
SECTION 7. Representations and Warranties. Each of the Guarantors
------------------------------
hereby represents and warrants, as to itself only, as follows:
(a) Such Guarantor (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
power and authority, and the legal right, to own and operate its property, to
lease the property it operates as lessee and to conduct the
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<PAGE>
business in which it is currently engaged, (c) is duly qualified as a foreign
partnership and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification, except to the extent that the failure to comply
therewith could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect and (d) is in compliance with all Requirements of Law except to
the extent that the failure to comply therewith could not reasonably be expected
to have a Material Adverse Effect.
(b) Such Guarantor has the power and authority, and the legal right, to
make, deliver and perform this Guaranty and each of the other Loan Documents to
which it is a party and to authorize the execution, delivery and performance of
this Guaranty and each of the other Loan Documents to which it is a party.
Except as set forth on Schedule 7(b), no consent or authorization of, filing
-------------
with, notice to or other act by or in respect of, any Governmental Authority
(including any filing, termination of any notice period or consent under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) or any other
Person is required to be obtained by either Guarantor in connection with the
execution, delivery, performance, validity or enforceability of this Guaranty,
except to the extent that failure to obtain or perform such consent,
authorization, notice or other act individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect. This Guaranty has
been, and each other Loan Document to which such Guarantor is a party will be,
duly executed and delivered on behalf of such Guarantor. This Guaranty
constitutes, and each other Loan Document to which such Guarantor is a party
when executed and delivered will constitute, a legal, valid and binding
obligation of such Guarantor, enforceable against such Guarantor in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
(c) The execution, delivery and performance of this Guaranty and each of
the other Loan Documents to which such Guarantor is a party, will not violate
any Requirement of Law or Contractual Obligation of such Guarantor, will not
accelerate or result in the acceleration of any payment obligations of such
Guarantor and will not result in, or require, the creation or imposition of any
Lien on any of the properties or revenues of such Guarantor pursuant to any such
Requirement of Law or Contractual Obligation, except to the extent that such
violation or Lien individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect.
(d) Such Guarantor has, independently and without reliance upon any of the
Lenders or the Agent and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Guaranty.
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<PAGE>
(e) Such Guarantor is not 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.
(f) Such Guarantor is not a "holding company", a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended. Such
Guarantor is not an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended. Such Guarantor is not subject to regulation under any Federal or
state statute, regulation, decree or order which limits its ability to incur
Indebtedness or conditions such ability upon any act, approval or consent of any
Governmental Authority (including, without limitation, the Small Business
Investment Company Act of 1958, as amended).
(g) The unaudited balance sheet of such Guarantor as at June 30, 1999,
certified by a Managing Director of such Guarantor, copies of which have
heretofore been furnished to each Lender, present fairly in all material
respects the financial condition of such Guarantor at such date. Such financial
statement has been prepared in accordance with GAAP, except that such unaudited
statements lack footnotes and other presentation items.
(h) Such Guarantor hereby represents and warrants that the audited balance
sheet of such Guarantor as of December 31, 1998 reported on by Ernst & Young
LLP, true, complete and correct copies of which have heretofore been furnished
to each Lender, present fairly in all material respects the financial condition
of such Guarantor as at such date.
SECTION 8. Amendments, Etc. No amendment or waiver of any provision
---------------
of this Guaranty, and no consent to any departure by either Guarantor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Guarantors, the Agent and the Required Lenders, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 9. Notices, Etc. All notices, requests and demands to or
------------
upon either Guarantor or the Agent or any Lender to be effective shall be in
writing or by telegraph or telex and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when delivered by hand,
or, in the case of mail, three days after deposit in the postal system, first
class postage prepaid, or, in the case of telegraphic notice, when sent,
answerback received, addressed to a party at the address provided for such party
in Schedule I hereto or set forth under its signature below, as the case may be.
----------
SECTION 10. No Waiver; Remedies. No failure on the part of the Agent
-------------------
or any Lender to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof or consent thereto; nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power
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<PAGE>
or privilege. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
SECTION 11. Continuing Guaranty; Assignments Under the Credit
-------------------------------------------------
Agreement. (a) Subject to Sections 11(b) and 11(c), this Guaranty is a
- --------- -------------- -----
continuing guaranty and shall (i) remain in full force and effect until the
later of (x) the payment in full in cash of the Guaranteed Obligations and all
other amounts payable under this Guaranty and (y) the Revolving Credit
Commitment Termination Date, (ii) be binding upon each of the Guarantors, its
successors and assigns and (iii) inure to the benefit of, and be enforceable by,
the Agent, the Lenders and their respective successors, transferees and assigns.
Without limiting the generality of the foregoing clause (iii), any Lender may
assign or otherwise transfer all or any portion of its rights and obligations
under the Credit Agreement (including, without limitation, all or any portion of
its Commitment or Commitments, the payments owing to it and the Note or Notes
held by it) to any other Person, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted to such Lender, herein
or otherwise, in each case as provided in Article 9 of the Credit Agreement.
---------
(b) The Guarantors' liability hereunder and the amount referred to in
Section 2(a) shall be reduced (i) to $5,000,000 in the aggregate upon the
- ------------
Borrower's demonstration to the reasonable satisfaction of the Agent that the
Effective Leverage Ratio is less than 3.00 to 1.00 (computed as of the most
recently completed fiscal quarter); and (ii) from time to time by an amount
equal to the amount of any direct or indirect equity contribution(s) to the
Borrower made from time to time by WSP, UC Holdings or CTN; provided that the
--------
Guarantor's liability hereunder and the amount referred to in Section 2(a)
------------
shall be reduced solely to the extent to which such equity contribution(s) shall
have been used to make optional prepayments of principal of the Loans, and which
prepayments shall be applied, at the election of the Borrower, to any scheduled
installments of principal of the Term Loans or to the Revolving Credit Loans
(with a concommitant reduction in the Revolving Credit Commitments).
(c) This Guarantee shall terminate, and none of the Guarantors, the Agent
or the Lenders shall have any further rights or obligations hereunder, upon the
Borrower's demonstration to the reasonable satisfaction of the Agent that the
Leverage Ratio is less than 3.25 to 1.00 (computed as of the most recently
completed fiscal quarter).
SECTION 13. Governing Law. This Guaranty shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York.
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<PAGE>
IN WITNESS WHEREOF, each of the Guarantors has caused this Guaranty to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
WILLIS STEIN & PARTNERS II, L.P.
By: WILLIS STEIN & PARTNERS MANAGEMENT II, L.P., its
General Partner
By: WILLIS STEIN & PARTNERS MANAGEMENT II,
By: /s/ Daniel M. Gill
----------------------------------------
Name: Daniel M. Gill
Title: Managing Director
Address for notice:
Willis Stein & Partners II, L.P.
227 West Monroe Street
Suite 4300
Chicago, IL 60606
Attn: Daniel M. Gill
Telecopy: 312-422-2424
WILLIS STEIN & PARTNERS DUTCH, L.P.
By: WILLIS STEIN & PARTNERS MANAGEMENT II, L.P., its
General Partner
By: WILLIS STEIN & PARTNERS MANAGMEMENT II,
By: /s/ Daniel M. Gill
----------------------------------------
Name: Daniel M. Gill
Title: Managing Director
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<PAGE>
Address for notice:
Willis Stein & Partners Dutch, L.P.
227 West Monroe Street
Suite 4300
Chicago, IL 60606
Attn: Daniel M. Gill
Telecopy: 312-422-2424
ACKNOWLEDGED AND AGREED:
CANADIAN IMPERIAL BANK OF COMMERCE, as Agent
By: /s/ Colleen Risorto
--------------------------
Name: Colleen Risorto
Title: Executive Director
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