<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
Under the Securities Exchange Act of 1934
(Amendment No. 3)
NORWOOD PROMOTIONAL PRODUCTS, INC.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
669729-10-5
(CUSIP Number)
Frank P. Krasovec, President Richard J. McMahon, Esquire
FPK, LLC Blank Rome Comisky & McCauley LLP
106 East Sixth Street, Suite 300 One Logan Square
Austin, Texas 78701 Philadelphia, Pennsylvania 19103-6998
(210) 227-7629 (215) 569-5500
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
October 30, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of (S)(S) 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box. [_]
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 669729-10-5 13D
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
(Entities Only)
Frank P. Krasovec
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See
2 Instructions) (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS (See Instructions)
4
PF, SC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
669,250
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY (See Item 6)
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
669,250
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
669,250 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12 (See Instructions)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
51.3%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON (See Instructions)
14
IN
- ------------------------------------------------------------------------------
-1-
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 669729-10-5 13D
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (Entities only)
James P. Gunning, Jr.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See
2 Instructions) (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS (See Instructions)
4
PF, SC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
500
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY (See Item 6)
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
500
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
500 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12 (See Instructions)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
0.04%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON (See Instructions)
14
IN
- ------------------------------------------------------------------------------
-2-
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 669729-10-5 13D
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (Entities Only)
John Finnell
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See
2 Instructions) (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS (See Instructions)
4
PF, OO, SC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
210,385
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY (See Item 6)
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
210,385
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
210,385 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12 (See Instructions)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
16.2%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON (See Instructions)
14
IN
- ------------------------------------------------------------------------------
-3-
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 669729-10-5 13D
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (Entities Only)
George Bell Strob
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See
2 Instructions) (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS (See Instructions)
4
PF, SC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 58,127 (See Item 6)
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
0
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
58,127
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
58,127 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12 (See Instructions)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
4.4%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON (See Instructions)
14
IN
- ------------------------------------------------------------------------------
-4-
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 669729-10-5 13D
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (Entities Only)
Brian P. Miller
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See
2 Instructions) (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS (See Instructions)
4
OO, SC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
17,475
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY (See Item 6)
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
17,475
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
17,475 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12 (See Instructions)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
1.4%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON (See Instructions)
14
IN
- ------------------------------------------------------------------------------
-5-
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 669729-10-5 13D
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (Entities Only)
Paul W. Larson
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See
2 Instructions) (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS (See Instructions)
4
PF, BK, SC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
64,898
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY (See Item 6)
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
64,898
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
64,898 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12 (See Instructions)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
5.0%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON (See Instructions)
14
IN
- ------------------------------------------------------------------------------
-6-
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 669729-10-5 13D
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (Entities Only)
Russell A. Devereau
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See
2 Instructions) (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS (See Instructions)
4
PF, SC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
4,834
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY (See Item 6)
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
4,834
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
4,834 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12 (See Instructions)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
0.37%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON (See Instructions)
14
IN
- ------------------------------------------------------------------------------
-7-
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 669729-10-5 13D
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (Entities Only)
James Preston
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See
2 Instructions) (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS (See Instructions)
4
PF, SC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Canada
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 1,000 (See Item 6)
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
0
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
1,000
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,500 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12 (See Instructions)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
.08%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON (See Instructions)
14
IN
- ------------------------------------------------------------------------------
-8-
<PAGE>
SCHEDULE 13D
- ------------------------ ---------------------
CUSIP NO. 669729-10-5
- ------------------------ ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1
David Kagel
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (See Instructions) (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
(See Instructions) PF, SC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 27,776
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
(See Item 6)
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 27,776
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
27,776 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 (See Instructions)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
2.12%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON (See Instructions)
14
IN
- ------------------------------------------------------------------------------
-9-
<PAGE>
- ------------------------ ---------------------
CUSIP NO. 669729-10-5
- ------------------------ ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1
John Max Waits
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (See Instructions) (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
(See Instructions) PF, BK, SC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 18,067
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
(See Item 6)
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 18,067
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
18,067 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 (See Instructions)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
1.39%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON (See Instructions)
14
IN
- ------------------------------------------------------------------------------
-10-
<PAGE>
SCHEDULE 13D
- ------------------------ ---------------------
CUSIP NO. 669729-10-5
- ------------------------ ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1
John H. Josephson
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (See Instructions) (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
(See Instructions) PF
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 30,728
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
(See Item 6)
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 30,728
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
30,728 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 (See Instructions)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
2.33%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON (See Instructions)
14
IN
- ------------------------------------------------------------------------------
-11-
<PAGE>
SCHEDULE 13D
- ------------------------ ---------------------
CUSIP NO. 669729-10-5
- ------------------------ ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1
Liberty Partners Holdings 17, L.L.C.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (See Instructions) (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
(See Instructions) OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 1,135,368
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
(See Item 6)
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 1,135,368
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
1,135,368 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 (See Instructions)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
46.8%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON (See Instructions)
14
OO (limited liability company)
- ------------------------------------------------------------------------------
-12-
<PAGE>
SCHEDULE 13D
- ------------------------ ---------------------
CUSIP NO. 669729-10-5
- ------------------------ ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1
Cirrus, LLC
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (See Instructions) (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
(See Instructions) OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Conneticut
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 162,756
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
(See Item 6)
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 162,756
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
162,756 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 (See Instructions)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
11.4%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON (See Instructions)
14
OO (limited liability company)
- ------------------------------------------------------------------------------
-13-
<PAGE>
Item 1. Security and Issuer.
This Amendment No. 3 to Schedule 13D report relates to the Common Stock,
$0.01 par value per share ("Common Stock"), of Norwood Promotional Products,
Inc. (the "Issuer" or the "Company"). The address of the Issuer's principal
executive offices is 106 East Sixth Street, Suite 300, Austin, Texas 78701.
Item 2. Identity and Background.
This statement is being jointly filed by each of the following persons:
Frank P. Krasovec, James P. Gunning, Jr., John Finnell, George Bell Strob, Brian
P. Miller, Paul W. Larson, Russell A. Devereau, James Preston, David Kagel, John
Max Waits, John H. Josephson, Liberty Partners Holdings 17, L.L.C ("Liberty")
and Cirrus, LLC ("Cirrus")(collectively referred to herein as the "Reporting
Persons").
Due to Mr. Krasovec's ownership of 51.3% of the Issuer's stock, he presently
has a Schedule 13G on file with the Commission. Mr. Krasovec's inclusion in
this Schedule 13D serves to amend his previous Schedule 13G filing.
Appendix A, which is incorporated herein by reference, sets forth the
following information with respect to each Reporting Person and anyone with whom
a Reporting Person shares voting or dispositive power with respect to his Common
Stock: (i) name, (ii) residence or business address, (iii) present principal
occupation or employment, (iv) principal business and address of any corporation
or other organization in which such employment is conducted, and (v)
citizenship.
Information with respect to each of the Reporting Persons is given solely
by such Reporting Person, and no Reporting Person assumes responsibility for the
accuracy or completeness of information given by another Reporting Person. By
their signature on this Statement, each of the Reporting Persons agrees that
this Statement is filed on behalf of such Reporting Person. Each of the
Reporting Persons may be deemed to be holding their shares of Common Stock with
the purpose (together with the other Reporting Persons) of acquiring control of
the Issuer through the Merger (as described below); accordingly, the Reporting
Persons may be deemed to constitute a "group" for purposes of Section 13(d)(3)
of the Act. The Reporting Persons expressly disclaim that they have agreed to
act as a group other than as described in this Statement. The filing of this
Statement shall not be construed as an admission that any of the Reporting
Persons is, for purposes of Section 13(d) or 13(g) of the Securities Exchange
Act of 1934 (the "Exchange Act"), the beneficial owner of the shares of Common
Stock covered by this Statement. It is anticipated that additional individuals
may become Reporting Persons.
None of the Reporting Persons or the other persons listed in this Item 2
has been (i) convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) during the last five years, or (ii) a party, during the
last five years, to a civil proceeding or a judicial or administrative body of
competent jurisdiction which resulted in any of them being subjected to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
As described in Item 4 below, on March 15, 1998, the Issuer and FPK, LLC, a
limited liability company ("LLC") formed and wholly owned by Frank P. Krasovec,
the Chairman, President and Chief Executive Officer of the Issuer, entered into
a Merger Agreement (the "Merger Agreement"). Under the Merger Agreement, LLC
formed a wholly-owned subsidiary ("Newco"), which has merged with and into
Issuer (the "Merger"), whereupon the separate existence of Newco has ceased, and
the Issuer continues as the surviving corporation ("Surviving Corporation"). On
October 30, 1998, a Certificate of Merger was duly filed with the Secretary of
State of the State of Texas. The Merger became effective on that date (the
"Effective Date").
As a result the Merger, all shares of Common Stock of the Issuer (other
than those held by the Reporting Persons and as described in Item 4 below) were
converted into the right to receive $20.70 per share. The amount of funds
necessary for the purchase of such shares of Common Stock of Issuer was
approximately $88.9 million.
Financing for the Merger and related costs and expenses, including $20.3
million in roll-over equity provided by members of the Buyout Group (as defined
in the Merger Agreement), was approximately $159.0 million, of which
approximately $88.9 million was required to pay the Merger Consideration to the
public shareholders, approximately $40.8 million was incurred to refinance
certain of the Issuer's current indebtedness, and approximately $9.0 million was
incurred to pay all expenses of the Issuer, LLC, Newco and the members of the
Buyout Group in connection with the Merger and the transactions contemplated
thereby. Such funds were furnished from (i) equity financing of approximately
$46.8 million, consisting of (A) approximately $20.3 million provided by the
Buyout Group, (B) approximately $3.5 million from the issuance of Common Stock
to Cirrus, LLC, (C) $3 million from the issuance of Common Stock to Liberty and
(D) $20 million from the issuance of Preferred Stock to Liberty, (ii) $100
million in credit facilities provided by Merrill Lynch Capital Corporation,
NationsBank, N.A. and NationsBanc Montgomery Securities, consisting of (A) $75
million senior secured term loans which were fully drawn at the Effective Time
and (B) a $25 million senior secured revolving credit facility, none of which
was drawn at the Effective Date, and (iii) $37 million from the issuance to
Liberty of subordinated debt at the Effective Time. The Issuer anticipates
funding its working capital needs after the Merger from the senior secured
revolving credit facility and from cash flow generated from operations.
Each Reporting Person (other than Liberty and Cirrus) has obtained the
Common Stock that he/she presently holds over a course of years for investment
purposes with personal funds, a bank loan that has been paid or as merger
consideration as a result of being a stockholder of a company that was purchased
by the Issuer. Liberty obtained the Common Stock that it presently holds on the
Effective Date pursuant to a Stock and Warrant Purchase Agreement, dated
Effective Date, by and among the Issuer, Liberty and the State Board of
Administration of Florida with capital contributions from its members and,
indirectly, with funds from the State Board of Administration of Florida.
Cirrus obtained the Common Stock that it presently holds on the Effective Date
pursuant to a Purchase Agreement, dated Effective Date, by and between the
Issuer and Cirrus with capital contributions from its members.
Item 4. Purpose of Transaction.
As described in Item 3 above, on March 15, 1998, the Issuer and LLC entered
into the Merger Agreement, and on October 30, 1998, a Certificate of Merger was
duly filed with the Secretary of State of the State of Texas and the Merger
became effective on that date.
As a result of the consummation of the Merger on the Effective Date:
(1) each share of Common Stock of the Issuer, issued and outstanding
immediately prior to the Effective Date (other than shares held by the Issuer or
any of its subsidiaries as treasury stock, shares held by the members of the
Buyout Group and shares held by dissenting shareholders who have validly
exercised and perfected their dissenters' rights under Texas law) was converted
into the right to receive $20.70 in cash, without interest, subject to
applicable back-up withholding of taxes. Each share of common stock of Newco
issued and outstanding immediately prior to the Effective Date was automatically
canceled;
(2) each option, warrant and convertible debt instrument of the Issuer to
purchase Common Stock outstanding immediately prior to the Effective Date (each
a "Stock Derivative") continued to be outstanding subsequent to the Effective
Date as options, warrants and convertible debt of the Surviving Corporation,
subject to all expiration, lapse and other terms and conditions thereof, except
that the term of all Stock Derivatives (other than convertible debt and employee
incentive stock options) were extended for three years from the date of their
current expiration;
(3) the articles of incorporation and by-laws of the Issuer, as in effect
immediately prior to the Effective Date, as amended (a) to convert the par value
of the Common Stock from no par to $.01 par value, (b) to authorize the issuance
of blank check preferred stock and (c) to authorize the issuance of Series A
Preferred Stock, became from and after the Effective Date, the articles of
incorporation and by-laws of the Surviving Corporation until amended in
accordance with its terms and the Texas Business Corporation Act ("TCBA");
(4) the directors and officers of Newco immediately prior to the Effective
Date became from and after the Effective Date, the directors and officers of the
Surviving Corporation. Such persons will continue as directors or officers, as
the case may be, of the Surviving Corporation until their successors have been
duly elected or appointed and qualified or until their earlier death,
resignation, or removal in accordance with the articles of incorporation and by-
laws of the Surviving Corporation; and
(5) the Issuer has delisted its shares of Common Stock from the NASDAQ
National Market System.
-14-
<PAGE>
Item 5. Interest in Securities of the Issuer.
As of the filing date of this Amendment No. 3 to the Schedule 13D ("Filing
Date"), Mr. Krasovec beneficially owns 669,250 shares of Common Stock, including
15,333 shares that Mr. Krasovec has the right to acquire through the exercise of
Issuer stock options vesting on or before December 29, 1998 ("Vested Options")
and excluding 14,667 shares that Mr. Krasovec has the right to acquire through
the exercise of Issuer stock options that do not vest until after December 29,
1998 ("Unvested Options"). Mr. Krasovec's 669,250 shares of Common Stock
represent approximately 51.3% of the Issuer's outstanding Common Stock as of
October 30, 1998. Except as set forth in Item 6 with respect to the election of
directors, Mr. Krasovec has the sole power to vote or direct the vote and the
sole power to dispose or to direct the disposition of the Common Stock of which
he is the beneficial owner.
As of the Filing Date, Mr. Gunning beneficially owns 500 shares of Common
Stock, excluding 16,000 shares that Mr. Gunning has the right to acquire through
the exercise of Unvested Options. Mr. Gunning's 500 shares of Common Stock
represent approximately 0.04% of the Issuer's outstanding Common Stock as of
October 30, 1998. Except as set forth in Item 6 with respect to the election of
directors, Mr. Gunning has the sole power to vote or direct the vote and the
sole power to dispose or to direct the disposition of the Common Stock of which
he is the beneficial owner.
As of the Filing Date, Mr. Finnell beneficially owns 210,385 shares of
Common Stock, including 12,928 shares that Mr. Finnell has the right to acquire
through the exercise of Vested Options and excluding 8,300 shares that Mr.
Finnell has the right to acquire through the exercise of Unvested Options. Mr.
Finnell's 210,385 shares of Common Stock represent approximately 16.2% of the
Issuer's outstanding Common Stock as of October 30, 1998. Except as set forth in
Item 6 with respect to the election of directors, Mr. Finnell has the sole power
to vote or direct the vote and the sole power to dispose or to direct the
disposition of the Common Stock of which he is the beneficial owner.
As of the Filing Date, Mr. Strob beneficially owns 58,127 shares of Common
Stock, including 20,942 shares that Mr. Strob has the right to acquire through
the exercise of Vested Options and excluding 20,000 shares that Mr. Strob has
the right to acquire through the exercise of Unvested Options. Mr. Strob's
58,127 shares of Common Stock represent approximately 4.4% of the Issuer's
outstanding Common Stock as of October 30, 1998. Mr. Strob holds all of his
shares of Common Stock jointly with his wife, Debra Ann Strob. Accordingly, Mrs.
Strob may be deemed to share in the power to vote or direct the vote of, the
power to dispose or to direct the disposition of and the power to receive or
direct the receipt of dividends from, or the proceeds from the sale of, Mr.
Strob's Common Stock. See also Item 6 with respect to the election of
directors.
-15-
<PAGE>
As of the Filing Date, Mr. Miller beneficially owns 17,475 shares of
Common Stock, excluding 2,167 shares that Mr. Miller has the right to acquire
through the exercise of Unvested Options. Mr. Miller's 17,475 shares of Common
Stock represent approximately 1.4% of the Issuer's outstanding Common Stock as
of October 30, 1998. On January 27, 1998, Mr. Miller sold 1,000 shares of Common
Stock on the open market for $17.00 a share. On January 28, 1998, Mr. Miller
sold 1,000 shares of Common Stock on the open market for $16.875 a share. On
February 13, 1998, Mr. Miller sold 1,000 shares of Common Stock on the open
market for $16.50 a share. Except as set forth in Item 6 with respect to the
election of directors, Mr. Miller has the sole power to vote or direct the vote
and the sole power to dispose or to direct the disposition of the Common Stock
of which he is the beneficial owner.
As of the Filing Date, Mr. Larson beneficially owns 64,898 shares of
Common Stock, including 6,467 shares that Mr. Larson has the right to acquire
through the exercise of Vested Options and excluding 2,333 shares that Mr.
Larson has the right to acquire through the exercise of Unvested Options. Mr.
Larson's 64,898 shares of Common Stock represent approximately 5.0% of the
Issuer's outstanding Common Stock as of October 30, 1998. Except as set forth in
Item 6 with respect to the election of directors, Mr. Larson has the sole power
to vote or direct the vote and the sole power to dispose or to direct the
disposition of the Common Stock of which he is the beneficial owner.
As of the Filing Date, Mr. Devereau beneficially owns 4,834 shares of
Common Stock, including 4,334 shares that Mr. Devereau has the right to acquire
through the exercise of Vested Options and excluding 5,666 shares that Mr.
Devereau has the right to acquire through the exercise of Unvested Options. Mr.
Devereau's 4,834 shares of Common Stock represent approximately 0.37% of the
Issuer's outstanding Common Stock as of October 30, 1998. Except as set forth in
Item 6 with respect to the election of directors, Mr. Devereau has the sole
power to vote or direct the vote and the sole power to dispose or to direct the
disposition of the Common Stock of which he is the beneficial owner.
As of the Filing Date, Mr. Preston beneficially owns 1,000 shares of
Common Stock, excluding 20,000 shares that Mr. Preston has the right to acquire
through the exercise of Unvested Options. Mr. Preston's 1,000 shares of Common
Stock represent approximtely 0.08% of the Issuer's outstanding Common Stock as
of October 30, 1998. On January 23, 1998, Mr. Preston was granted options under
the employee stock option plan to purchase 20,000 shares of Common Stock at
$16.75 per share. Mr. Preston holds all of his shares of Common Stock jointly
with his wife, Brenda Preston. Accordingly, Mrs. Preston may be deemed to share
in the power to vote or direct the vote of, the power to dispose or to direct
the disposition of and the power to receive or direct the receipt of dividends
from, or the proceeds from the sale of, Mr. Preston's Common Stock. See also
Item 6 with respect to the election of directors.
As of the Filing Date, Mr. Kagel beneficially owns 27,776 shares of Common
Stock, including 20,318 shares that Mr. Kagel has the right to acquire through
the exercise of Vested Options and excluding 14,467 shares that Mr. Kagel has
the right to acquire through the exercise of Unvested Options. Mr. Kagel's
27,776 shares of Common Stock represent approximately 2.12% of the Issuer's
outstanding Common Stock as of October 30, 1998. Except as set forth in Item 6
with respect to the election of directors, Mr. Kagel has the sole power to vote
or direct the vote and the sole power to dispose or to direct the disposition of
the Common Stock of which he is the beneficial owner.
As of the Filing Date, Mr. Waits beneficially owns 18,067 shares of
Common Stock, including 11,329 shares that Mr. Waits has the right to acquire
through the exercise of Vested Options and excluding 13,833 shares that Mr.
Waits has the right to acquire through the exercise of Unvested Options. Mr.
Wait's 13,100 shares of Common Stock represent approximately 1.39% of the
Issuer's outstanding Common Stock as of October 30, 1998. Except as set forth in
Item 6 with respect to the election of directors, Mr. Waits has the sole power
to vote or direct the vote and the sole power to dispose or to direct the
disposition of the Common Stock of which he is the beneficial owner.
As of the Filing Date, Mr. Josephson beneficially owns 30,728 shares of
Common Stock, including 28,728 shares that Mr. Josephson has the right to
acquire through the exercise of vested warrants. Mr. Josephson's 30,728 shares
of Common Stock represent approximately 2.33% of the issue's outstanding Common
Stock as of October 30, 1998. Except as set forth in Item 6 with respect to the
election of directors, Mr. Josephson has the sole power to vote or direct the
vote and the sole power to dispose or to direct the disposition of the Common
Stock of which he is the beneficial owner.
As of the Filing Date, Liberty beneficially owns 1,135,368 shares of Common
Stock, including 990,440 shares that Liberty has the right to acquire through
the exercise of vested warrants. Liberty's 1,135,368 shares of Common Stock
represent approximately 46.8% of the Issuer's outstanding Common Stock as of
October 30, 1998. Except as set forth in Item 6 with respect to the election of
directors, Liberty has the sole power to vote or direct the vote and the sole
power to dispose or to direct the disposition of the Common Stock of which it is
the beneficial owner.
As of the Filing Date, Cirrus beneficially owns 162,756 shares of Common
Stock. Cirrus' 162,756 shares of Common Stock represent approximately 11.4% of
the Issuer's outstanding Common Stock as of October 30, 1998. Except as set
forth in Item 6 with respect to the election of directors, Cirrus has the sole
power to vote or direct the vote and the sole power to dispose or to direct the
disposition of the Common Stock of which it is the beneficial owner.
Each of the Reporting Persons has agreed to participate as a member of
the Buyout Group. The filing of this Statement shall not, however, be construed
as an admission that any of the members is, for the purposes of Sections 13(d)
or 13(g) of the Exchange Act, the beneficial owner of the shares covered by this
Statement. The aggregate beneficial ownership of the Reporting Persons is 100%
of the outstanding shares of Common Stock of the Issuer.
The determination of percent beneficial ownership of Common Stock is
based upon their being 1,290,012 shares of Common Stock were issued and
outstanding as of October 30, 1998.
Except as described above in Item 3 and this Item 5, none of the
Reporting Persons has effected any transactions in Common Stock during the past
sixty days.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
In addition to the relationship and understanding among the Reporting
Persons already described in this Schedule, on the Effective Date, the Reporting
Persons, and certain other persons as described below, entered into a
Shareholders' Agreement which provides for certain rights and responsibilities
among the shareholders, including an agreement among the shareholders to vote
for Mr. Krasovec and two representatives of Liberty as directors of the Issuer.
A copy of the Shareholders Agreement is attached hereto as Exhibit E and
incorporated herein by reference. As soon as practicable after the Filing Date,
certain members of the Buyout Group intend to sell certain of their shares which
they currently hold to certain persons, which persons will include members of
the Buyout Group.
At the present time there are no other contracts, arrangements,
understandings or relationships (legal or otherwise) among the Reporting Persons
and/or between such persons and any other person with respect to any securities
of the Issuer, including but not limited to transfer or voting of any of the
securities, finder's fees, joint ventures, loan or option arrangements, put or
calls, guarantees of profits, division of profits or loss, or the giving or
withholding of proxies.
-16-
<PAGE>
Item 7. Materials to be Filed as Exhibits
Exhibit A - Joint Filing Agreement pursuant to Rule
13d-1(f)(1)(iii)
Exhibit B- 1 Credit Agreement dated October 30, 1998 by and between
the Issuer, Merrill Lynch & Co., NationsBanc
Montgomery Securities LLC, and NationsBank, N.A.
Exhibit B- 2 Subordinated Loan Agreement dated October 30, 1998 by
and between the Issuer and the State Board of
Administration of Florida.
Exhibit B- 3 Stock and Warrant Purchase Agreement dated October 30,
1998 by and among the Issuer, Liberty Partners
Holdings 17, L.L.C. and the State Board of
Administration of Florida.
Exhibit B- 4 Purchase Agreement dated October 30, 1998 by and
between the Issuer and Cirrus, LLC
Exhibit C*-4 Agreement and Plan of Merger between LLC and Issuer
dated March 15, 1998.
Exhibit D - Power of Attorney (included on page 18)
Exhibit E - Shareholders' Agreement dated October 30, 1998 by and
between the Issuer and its shareholders.
- -----------------
*Previously Filed
-17-
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of each Reporting Person's
respective knowledge and belief, each Reporting Person certifies that the
information set forth in this Statement is true, complete and correct.
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Frank P. Krasovec and James P. Gunning, Jr. and
each of them, his true and lawful attorney-in-fact and agent with full power of
substitution or resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments to this Schedule 13D, and to
file the same, with all exhibits thereto, and other documentation in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Amendment No. 3 to Schedule 13D has been signed below by the following persons
on the dates indicated.
SIGNATURE DATE
--------- ----
* November 9, 1998
- ---------------------------------- ----------------
Frank P. Krasovec
/s/ James P. Gunning, Jr. November 9, 1998
- ---------------------------------- ----------------
James P. Gunning, Jr.
* November 9, 1998
- ---------------------------------- ----------------
John Finnel
* November 9, 1998
- ---------------------------------- ----------------
James Preston
* November 9, 1998
- ---------------------------------- ----------------
Paul W. Larson
* November 9, 1998
- ---------------------------------- ----------------
Russell A. Devereau
* November 9, 1998
- ---------------------------------- ----------------
George Bell Strob
* November 9, 1998
- ---------------------------------- ----------------
Brian P. Miller
* November 9, 1998
- ---------------------------------- ----------------
J. Max Waits
* November 9, 1998
- ---------------------------------- ----------------
David Kagel
* November 9, 1998
- ---------------------------------- ----------------
John H. Josephson
LIBERTY PARTNERS HOLDINGS 17, L.L.C.
By: Liberty Partners, L.P., its manager
By: Liberty Capital Partners, Inc.,
By: /s/ G. Michael Stakias
------------------------- November 9, 1998
Name: G. Michael Stakias ----------------
Title: Manager Director
CIRRUS, LLC
By:
/s/ Timothy Tully November 9, 1998
------------------- ----------------
Name: Timothy Tully
Title: Managing Member
* By: /s/ James P. Gunning, Jr.
----------------------------
Attorney-in-Fact
-18-
<PAGE>
APPENDIX A
----------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Name Address Occupation/Principal Business Address Citizenship/Place
Business of Organization
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frank P. Krasovec 106 E. 6th Street Chief Executive 106 E. 6th Street U.S.A.
Suite 300 Officer-Norwood Suite 300
Austin, TX 78701 Promotional Austin, TX 78701
Products, Inc.
- -----------------------------------------------------------------------------------------------------------------------
James P. Gunning, Jr. 106 E. 6th Street Chief Financial 106 E. 6th Street U.S.A.
Suite 300 Officer-Norwood Suite 300
Austin, TX 78701 Promotional Austin, TX 78701
Products, Inc.
- -----------------------------------------------------------------------------------------------------------------------
John Finnell 106 E. 6th Street Senior Vice 106 E. 6th Street U.S.A.
Suite 300 President Suite 300
Austin, TX 78701 Performance Austin, TX 78701
Enhancement-
Norwood Promotional
Products, Inc.
- -----------------------------------------------------------------------------------------------------------------------
George Bell Strob 19923 Encino Grove President-Radio 615 Perez Street U.S.A.
San Antonio, TX 78259 Cap Company San Antonio, TX 78207
- -----------------------------------------------------------------------------------------------------------------------
Debra Ann Strob 19923 Encino Grove U.S.A.
San Antonio, TX 78259 N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Brian P. Miller 3533 Ridgewood Dr. Plant Manager- 2300 Palmer Street U.S.A.
Pittsburgh, PA 15235 Radio Cap Company Pittsburgh, PA 15218
- -----------------------------------------------------------------------------------------------------------------------
Paul W. Larson 2135 Encino Loop Vice President 615 Perez Street U.S.A.
San Antonio, TX Operations-Radio San Antonio, TX 78207
78259 Cap Company
- -----------------------------------------------------------------------------------------------------------------------
James Preston 38 Fair Oaks Chief Executive 615 Perez Canadian
St. Louis, MO 63124 Officer-Radio San Antonio, TX 78207
Cap Company
- -----------------------------------------------------------------------------------------------------------------------
Brenda Preston 38 Fair Oaks Canadian
St. Louis, MO 63124 N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Russell A. Devereau 40 Kenney Dr. President-Artmold 40 Kenney Dr. U.S.A.
Cranston, RI 92829 Products Cranston, RI 92829
Corporation
- -----------------------------------------------------------------------------------------------------------------------
David Kagel 8700 Bellanca Ave. President-Barlow 8700 Bellanca Ave. U.S.A.
Los Angeles, CA 90045 Promotional Los Angeles, CA 90045
Products, Inc.
- -----------------------------------------------------------------------------------------------------------------------
J. Max Waits 2149 NW 135th Street General Manager- 214 SW Jackson Street U.S.A.
Clive, IA 50325 Air-Tex Des Moines, IA 50315
Corporation
- -----------------------------------------------------------------------------------------------------------------------
John H. Josephson c/o Allen & Co. Inc. Investment Banker c/o Allen & Co. Inc. U.S.A.
711 Fifth Avenue 711 Fifth Avenue
New York, New York New York, New York
10022 10022
- -----------------------------------------------------------------------------------------------------------------------
Liberty Partner Holdings 1177 Avenue of the Americas Private Equity 1177 Avenue of the Americas Delaware
17, L.L.C. 34th Floor Investing 34th Floor
New York, NY 10036 New York, NY 10036
Attention: Paul J. Huston Attention: Paul J. Huston
- -----------------------------------------------------------------------------------------------------------------------
Liberty Investments 1177 Avenue of the Americas Private Equity 1177 Avenue of the Americas Delaware
5, Inc. 34th Floor Investing 34th Floor
New York, NY 10036-2714 New York, NY 10036-2714
Attention: Paul J. Huston Attention: Paul J. Huston
- -----------------------------------------------------------------------------------------------------------------------
Liberty Investment 1177 Avenue of the Americas Private Equity 1177 Avenue of the Americas Delaware
Partners 34th Floor Investing 34th Floor
New York, NY 10036-2714 New York, NY 10036-2714
Attention: Paul J. Huston Attention: Paul J. Huston
- -----------------------------------------------------------------------------------------------------------------------
Liberty Partners, L.P. 1177 Avenue of the Americas Private Equity 1177 Avenue of the Anericas Delaware
34th Floor Investing 34th Floor
New York, NY 10036-2714 New York, NY 10036-2714
Attention: Paul J. Huston Attention: Paul J. Huston
- -----------------------------------------------------------------------------------------------------------------------
Cirrus, LLC c/o Heron Investments, LLC Private Equity c/o Heron Investments, LLC Connecticut
301 Tresset Boulevard Investing 301 Tresset Boulevard
13th Floor 13th Floor
Stamford, CT 06901 Stamford, CT 06901
Attention: Tim Tully Attention: Tim Tully
- -----------------------------------------------------------------------------------------------------------------------
Daniel P. Tully Cirrus, LLC Retired Cirrus, LLC U.S.A.
c/o Heron Investments, LLC c/o Heron Investments, LLC
301 Tresser Blvd., 13th Floor 301 Tresser Blvd., 13th Floor
Stamford, CT 06901 Stamford, CT 06901
- -----------------------------------------------------------------------------------------------------------------------
Eileen T. Ceglarski Cirrus, LLC Housewife Cirrus, LLC U.S.A.
c/o Heron Investments, LLC c/o Heron Investments, LLC
301 Tresser Blvd., 13th Floor 301 Tresser Blvd., 13th Floor
Stamford, CT 06901 Stamford, CT 06901
- -----------------------------------------------------------------------------------------------------------------------
Daniel G. Tully Cirrus, LLC Investment Banker Cirrus, LLC U.S.A.
c/o Heron Investments, LLC c/o Heron Investments, LLC
301 Tresser Blvd., 13th Floor 301 Tresser Blvd., 13th Floor
Stamford, CT 06901 Stamford, CT 06901
- -----------------------------------------------------------------------------------------------------------------------
Timothy Tully Cirrus, LLC Investor/Trader Cirrus, LLC U.S.A.
c/o Heron Investments, LLC c/o Heron Investments, LLC
301 Tresser Blvd., 13th Floor 301 Tresser Blvd., 13th Floor
Stamford, CT 06901 Stamford, CT 06901
- -----------------------------------------------------------------------------------------------------------------------
Elizabeth T. Berry Cirrus, LLC Housewife Cirrus, LLC U.S.A.
c/o Heron Investments, LLC c/o Heron Investments, LLC
301 Tresser Blvd., 13th Floor 301 Tresser Blvd., 13th Floor
Stamford, CT 06901 Stamford, CT 06901
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
-20-
<PAGE>
EXHIBIT A
Joint Filing Agreement
In accordance with Rule 13d-1(f)(1) of Regulation 13D-G of the General
Rules and Regulations of the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, the undersigned agree to the joint
filing on behalf of each of them to this Statement and any subsequent amendments
hereto.
SIGNATURE DATE
--------- ----
/s/ Frank P. Krasovec March 20, 1998
- ---------------------------------- --------------
Frank P. Krasovec
/s/ James P. Gunning, Jr. March 20, 1998
- ---------------------------------- --------------
James P. Gunning, Jr.
/s/ John Finnel March 20, 1998
- ---------------------------------- --------------
John Finnel
/s/ James Preston March 23, 1998
- ---------------------------------- --------------
James Preston
/s/ Paul W. Larson March 20, 1998
- ---------------------------------- --------------
Paul W. Larson
/s/ Russell A. Devereau March 24, 1998
- ---------------------------------- --------------
Russell A. Devereau
/s/ George Bell Strob March 20, 1998
- ---------------------------------- --------------
George Bell Strob
/s/ Brian P. Miller March 20, 1998
- ---------------------------------- --------------
Brian P. Miller
/s/ J. Max Waits March 26, 1998
- ---------------------------------- --------------
J. Max Waits
/s/ David Kagel March 26, 1998
- ---------------------------------- --------------
David Kagel
/s/ John H. Josephson July 29, 1998
- ---------------------------------- --------------
John H. Josephson
LIBERTY PARTNERS HOLDINGS 17, L.L.C.
By: Liberty Partners, L.P., its manager
By: Liberty Capital Partners, Inc.,
its general partner
By: /s/ G. Michael Stakias November 9, 1998
------------------------ ----------------------
Name: G. Michael Stakias
Title: Managing Director
CIRRUS, LLC
By: November 9, 1998
/s/ Timothy Tully ----------------------
---------------------
Name: Timothy Tully
Title: Managing Member
-19-
<PAGE>
EXHIBIT B.1
================================================================================
NORWOOD PROMOTIONAL PRODUCTS, INC.,
as Borrower
and
SUBSIDIARY GUARANTORS
______________________
$100,000,000
CREDIT AGREEMENT
Dated as of October 30, 1998
______________________
MERRILL LYNCH & CO.
and
NATIONSBANC MONTGOMERY SECURITIES LLC
as Joint Lead Arrangers
and
MERRILL LYNCH & CO.,
as Syndication Agent and Documentation Agent
and
NATIONSBANK, N.A.,
as Administrative Agent
and
THE LENDERS PARTY HERETO FROM TIME TO TIME
================================================================================
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Definitions and Accounting Matters............................................................ 1
----------------------------------
1.01. Certain Defined Terms............................................................................ 1
1.02. Accounting Terms and Determinations.............................................................. 29
1.03. Classes and Types of Loans....................................................................... 29
1.04. Rules of Construction............................................................................ 30
Section 2. Commitments, Loans, Notes, Prepayments........................................................ 30
--------------------------------------
2.01. Loans............................................................................................ 30
2.02. Borrowings....................................................................................... 32
2.03. Letters of Credit................................................................................ 32
2.04. Termination and Reductions of Commitments........................................................ 36
2.05. Fees............................................................................................. 37
2.06. Lending Offices.................................................................................. 37
2.07. Several Obligations.............................................................................. 37
2.08. Notes; Register.................................................................................. 37
2.09. Optional Prepayments and Conversions or Continuations of Loans................................... 38
2.10. Mandatory Prepayments............................................................................ 39
2.11. Replacement of Lenders........................................................................... 42
2.12. Annual Cleandown................................................................................. 43
Section 3. Payments of Principal and Interest............................................................ 43
----------------------------------
3.01. Repayment of Loans............................................................................... 43
3.02. Interest......................................................................................... 44
Section 4. Payments; Pro Rata Treatment; Computations; Etc............................................... 45
-----------------------------------------------
4.01. Payments......................................................................................... 45
4.02. Pro Rata Treatment............................................................................... 45
4.03. Computations..................................................................................... 46
4.04. Minimum Amounts.................................................................................. 46
4.05. Certain Notices.................................................................................. 46
4.06. Non-Receipt of Funds by Administrative Agent..................................................... 47
4.07. Right of Setoff; Sharing of Payments, Etc........................................................ 47
Section 5. Yield Protection, Etc......................................................................... 48
---------------------
5.01. Additional Costs................................................................................. 48
5.02. Limitation on Types of Loans..................................................................... 50
5.03. Illegality....................................................................................... 50
5.04. Treatment of Affected Loans...................................................................... 50
5.05. Compensation..................................................................................... 51
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.06. Net Payments..................................................................................... 51
Section 6. Guarantee..................................................................................... 53
---------
6.01. The Guarantee.................................................................................... 53
6.02. Obligations Unconditional........................................................................ 54
6.03. Reinstatement.................................................................................... 55
6.04. Subrogation; Subordination....................................................................... 55
6.05. Remedies......................................................................................... 55
6.06. Instrument for the Payment of Money.............................................................. 55
6.07. Continuing Guarantee............................................................................. 56
6.08. General Limitation on Guarantee Obligations...................................................... 56
Section 7. Conditions Precedent.......................................................................... 56
--------------------
7.01. Initial Extension of Credit...................................................................... 56
7.02. Initial and Subsequent Extensions of Credit...................................................... 62
7.03. Determinations Under Section 7................................................................... 63
Section 8. Representations and Warranties................................................................ 63
------------------------------
8.01. Corporate Existence.............................................................................. 63
8.02. Financial Statements; Financial Condition; Etc................................................... 63
8.03. Litigation....................................................................................... 64
8.04. No Breach; No Default............................................................................ 64
8.05. Action........................................................................................... 65
8.06. Approvals........................................................................................ 65
8.07. ERISA............................................................................................ 65
8.08. Taxes............................................................................................ 66
8.09. Investment Company Act; Public Utility Holding Company Act; Other Restrictions................... 66
8.10. No Burdensome Restrictions....................................................................... 66
8.11. Subordinated Notes and PIK Preferred............................................................. 66
8.12. Environmental Matters............................................................................ 66
8.13. Environmental Investigations..................................................................... 67
8.14. Use of Proceeds.................................................................................. 67
8.15. Subsidiaries..................................................................................... 67
8.16. Properties....................................................................................... 68
8.17. Security Interest; Absence of Financing Statements............................................... 68
8.18. Compliance with Laws............................................................................. 68
8.19. True and Complete Disclosure..................................................................... 68
8.20. Solvency......................................................................................... 69
8.21. Employee and Labor Matters....................................................................... 69
8.22. Intellectual Property............................................................................ 69
8.23. Representations and Warranties in Documents...................................................... 70
8.24. Senior Indebtedness.............................................................................. 70
8.25. Year 2000........................................................................................ 70
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 9. Covenants..................................................................................... 70
---------
9.01. Financial Statements, Etc........................................................................ 70
9.02. Litigation, Etc.................................................................................. 73
9.03. Existence; Compliance with Law; Payment of Taxes; Inspection Rights;
Performance of Obligations; Etc............................................................... 73
9.04. Insurance........................................................................................ 74
9.05. Limitation on Issuance or Disposals of Capital Stock of Subsidiaries............................. 75
9.06. Limitation on Fundamental Changes; Limitation on Acquisitions; Limitation on
Dispositions.................................................................................. 76
9.07. Limitation on Liens and Related Matters.......................................................... 77
9.08. Prohibition on Disqualified Capital Stock; Limitation on Indebtedness............................ 79
9.09. Limitations on Investments....................................................................... 80
9.10. Limitation on Dividend Payments.................................................................. 82
9.11. Financial Covenants.............................................................................. 82
9.12. Pledge of Additional Collateral.................................................................. 84
9.13. Security Interests............................................................................... 84
9.14. Compliance with Environmental Laws............................................................... 85
9.15. Limitation on Lines of Business.................................................................. 85
9.16. Limitation on Transactions with Affiliates....................................................... 85
9.17. Limitation on Accounting Changes; Limitation on Investment Company Status........................ 86
9.18. Interest Rate Protection Agreements.............................................................. 86
9.19. Limitation on Modifications of Certain Documents, Etc............................................ 86
9.20. Limitation on Payments or Prepayments of Indebtedness or Preferred Stock, Etc.................... 86
9.21. Limitation on Certain Restrictions Affecting Subsidiaries........................................ 87
9.22. Additional Obligors.............................................................................. 87
9.23. Restriction on Leases............................................................................ 88
9.24. Limitation on Sale or Discount of Receivables.................................................... 88
9.25. Limitation on Contingent Obligations............................................................. 88
9.26. Landlord Lien Assurances......................................................................... 89
9.27. Limitation on Other Restrictions on Amendment of Credit Documents................................ 89
9.28. Limitation on Subsidiaries....................................................................... 89
9.29. Limitation on Designated Senior Indebtedness..................................................... 89
9.30. Limitation on Change of Principal Place of Business or Corporate Name............................ 89
9.31. Changes in Factual Information Regarding the Collateral.......................................... 89
9.32. Casualty and Condemnation........................................................................ 90
9.33. Take or Pay Contracts............................................................................ 90
9.34. Tax Sharing Arrangements........................................................................ 90
9.35. Year 2000 Compliance............................................................................. 90
Section 10. Events of Default............................................................................. 90
-----------------
Section 11. Administrative Agent.......................................................................... 93
--------------------
11.01. General Provisions............................................................................... 93
11.02. Indemnification.................................................................................. 95
11.03. Consents Under Other Credit Documents............................................................ 95
11.04. Collateral Sub-Agents............................................................................ 95
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 12. Miscellaneous................................................................................. 95
-------------
12.01. Waiver.......................................................................................... 95
12.02. Notices......................................................................................... 95
12.03. Expenses, Indemnification, Etc.................................................................. 96
12.04. Amendments, Etc................................................................................. 97
12.05. Successors and Assigns.......................................................................... 99
12.06. Assignments and Participations.................................................................. 99
12.07. Survival........................................................................................ 101
12.08. Captions........................................................................................ 101
12.09. Counterparts.................................................................................... 101
12.10. Governing Law; Submission to Jurisdiction; Waivers; Etc......................................... 101
12.11. Confidentiality................................................................................. 102
12.12. Independence of Representations, Warranties and Covenants....................................... 102
12.13. Severability.................................................................................... 102
12.14. Prior Understandings............................................................................ 102
12.15. Acknowledgments................................................................................. 103
Signatures................................................................................................. S-1
</TABLE>
-iv-
<PAGE>
ANNEX A - Commitments
SCHEDULE 1.01(a) - Subsidiary Guarantors
SCHEDULE 7.01(ii) - Indebtedness to Be Repaid on the Closing Date
SCHEDULE 8.02 - Certain Contingent Obligations
SCHEDULE 8.03 - Litigation
SCHEDULE 8.12 - Environmental Matters
SCHEDULE 8.15 - Subsidiaries of Borrower
SCHEDULE 8.21 - Labor Matters
SCHEDULE 9.07 - Certain Existing Liens
SCHEDULE 9.08 - Certain Indebtedness to Remain Outstanding
SCHEDULE 9.09 - Investments
SCHEDULE 9.16 - Existing Affiliate Agreements
EXHIBIT A-1 - Form of Revolving Credit Note
EXHIBIT A-2 - Form of Tranche A Term Loan Note
EXHIBIT A-3 - Form of Tranche B Term Loan Note
EXHIBIT A-4 - Form of Swing Loan Note
EXHIBIT B - Form of Intercompany Note
EXHIBIT C - Form of Interest Rate Certificate
EXHIBIT D - Form of Security Agreement
EXHIBIT E-1 - Form of Opinion of Counsel to the Obligors
EXHIBIT E-2 - Form of Local Counsel Opinion
EXHIBIT F - Form of Notice of Assignment
EXHIBIT G - Form of Mortgage
EXHIBIT H - Form of Section 5.06 Certificate
EXHIBIT I - Form of Notice of Borrowing
EXHIBIT J - Form of Notice of Conversion/Continuation
EXHIBIT K - Form of Landlord Lien Waiver
EXHIBIT L - Form of Joinder Agreement
EXHIBIT M - Form of Assignment and Acceptance Agreement
-v-
<PAGE>
CREDIT AGREEMENT dated as of October 30, 1998 among: NORWOOD
PROMOTIONAL PRODUCTS, INC., a Texas corporation ("Borrower" ); EACH OF THE
--------
SUBSIDIARY GUARANTORS party hereto; each of the lenders that is a signatory
hereto identified under the caption "LENDERS" on the signature pages hereto or
that, pursuant to Section 12.06(b), shall become a "Lender" hereunder
(individually, a "Lender" and, collectively, the "Lenders"); MERRILL LYNCH &
------ -------
CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ("Merrill Lynch") AND
-------------
NATIONSBANC MONTGOMERY SECURITIES LLC, as Joint Lead Arrangers ("Joint Lead
Arrangers"), MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED, as Syndication Agent and Documentation Agent (in such capacities
"Syndication Agent"), and NATIONSBANK, N.A., as Administrative Agent for the
-----------------
Lenders (in such capacity, together with its successors in such capacity,
"Administrative Agent").
--------------------
The parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
----------------------------------
1.01. Certain Defined Terms. As used herein, the following terms
---------------------
shall have the following meanings:
"Acquisition" shall mean any transaction or series of related
-----------
transactions for the direct or indirect (a) acquisition of all or substantially
all of the Property of a Person, or of any business or division of a Person, (b)
acquisition of in excess of 50% of the capital stock, partnership interests,
membership interests or equity of any Person, or otherwise causing any Person to
become a Subsidiary, or (c) a merger or consolidation or any other combination
with another Person.
"Acquisition Consideration" shall mean the purchase consideration for
-------------------------
any Acquisition and all other payments made and liabilities incurred by any
Company in exchange for, or as part of, or in connection with any Acquisition,
whether paid in cash or by exchange of Equity Interests or of assets or
otherwise and whether payable at or prior to the consummation of such
Acquisition or deferred for payment at any future time, whether or not any such
future payment is subject to the occurrence of any contingency, and includes any
and all payments and liabilities representing the purchase price and any
assumptions of liabilities, "earn-outs" and other Profit Payment Agreements,
consulting agreements, service agreements and non-competition agreements and
other liabilities of every type and description.
"Additional Collateral" see Section 9.12.
---------------------
"Adjusted Net Income" shall mean, for any Measurement Period, the
-------------------
consolidated net income (loss) of Borrower and its Consolidated Subsidiaries
calculated on a consolidated basis in accordance with GAAP, adjusted by
excluding (to the extent taken into account in the calculation of such
consolidated net income (loss)) the effect of (a) gains for such period from
Dispositions (including Excluded Dispositions), other than the Disposition of
inventory in the ordinary course of business, and the tax consequences thereof,
(b) any non-recurring or extraordinary items of income and the non-cash portion
of any extraordinary item of expense for such period, (c) the portion of net
income (loss) of any Person (other than a Subsidiary) in which any Company has
an ownership interest, except to the extent of the amount of cash dividends or
other cash distributions actually paid to Borrower or (subject to clause (e)
below) any Subsidiary during such period, (d) the net income (loss) of any
Person combined with any Company on a "pooling of interests" basis attributable
to any period prior to the date of combination, and (e) the net income of any
Subsidiary to the extent that the declaration or payment of dividends or similar
distribution by such Subsidiary was not for the relevant period permitted,
di-
<PAGE>
-2-
rectly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Subsidiary or its stockholders.
"Administrative Agent" see the introduction to this Agreement.
--------------------
"Administrative Agent's Fee Letter" shall mean the Fee Letter, dated
---------------------------------
October 6, 1998, by and between NationsBank, N.A. and Borrower.
"Advance Date" see Section 4.06.
------------
"Affiliate" shall mean, with respect to any Person, any other Person
---------
which directly or indirectly controls, or is under common control with, or is
controlled by, such Person and, if such Person is an individual, any member of
the immediate family (including parents, spouse and children) of such individual
and any trust whose principal beneficiary is such individual or one or more
members of such immediate family and any Person who is controlled by any such
member or trust. As used in this definition, "control" (including, with its
-------
correlative meanings, "controlled by" and "under common control with") shall
------------- -------------------------
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise); provided,
--------
however, that, in any event, any Person which owns directly or indirectly 10% or
- -------
more of the securities having ordinary voting power for the election of
directors or other governing body of a corporation or 10% or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner or non-managing member of such other Person) will be deemed to
control such corporation or other Person. Notwithstanding the foregoing, solely
for purposes of Section 9.16, Borrower shall not be deemed an Affiliate of any
Subsidiary and no Wholly Owned Subsidiary shall be deemed an Affiliate of any
other Wholly Owned Subsidiary or Borrower.
"Affiliate Transaction" see Section 9.16.
---------------------
"Agent" shall mean Administrative Agent, Syndication Agent or either
-----
Arranger.
"Agreement" shall mean this Credit Agreement, as amended from time to
---------
time.
"Alternate Base Rate" shall mean for any day, a rate per annum that is
------------------- --- -----
equal to the higher of (i) the Federal Funds Rate, plus 0.50% or (ii) the Prime
----
Rate.
"Alternate Base Rate Loans" shall mean Loans that bear interest at
-------------------------
rates based upon the Alternate Base Rate.
"Amortization Payment" shall mean each scheduled installment of
--------------------
payments on the Term Loans as set forth in Section 3.01(c).
"Applicable Lending Office" shall mean, for each Lender and for each
-------------------------
Type of Loan, the "Lending Office" of such Lender (or of an Affiliate of such
Lender) designated for such type of Loan on the signature pages hereof or such
other office of such Lender (or of an Affiliate of such Lender) as such Lender
may from time to time specify to Administrative Agent and Borrower as the office
by which its Loans of such Type are to be made and maintained.
"Applicable Margin" shall be (x) from the Closing Date to the date
-----------------
(the "Reset Date") Borrower shall have delivered to the Lenders the financial
----------
statements and Interest Rate Certificate required by Sec-
<PAGE>
-3-
tions 9.01(a), (b) and (d) in respect of the first four full fiscal quarters of
Borrower ended after the Closing Date, the rates per annum set forth opposite
--- -----
Tier II below; provided, however, if the Leverage Ratio is 5:00:1.0 or greater
-------- -------
as evidenced by the financial statements and Interest Rate Certificate delivered
to the Lenders by the Borrower as required by Sections 9.01(a), (b) and (d),
then Tier I shall apply, and (y) after the Reset Date, when the Leverage Ratio
at the end of the most recently ended fiscal quarter ending after the Reset Date
is as set forth below, the percentage per annum set forth opposite such Leverage
--- -----
Ratio set forth below. Any change in the Leverage Ratio shall be effective to
adjust the Applicable Margin as of the date of receipt by Administrative Agent
of the Interest Rate Certificate most recently delivered pursuant to Section
9.01(d). If Borrower fails to deliver the Interest Rate Certificates and
financial statements within the times specified in Sections 9.01, such ratio
shall be deemed to be that set forth opposite Tier I below until Borrower
delivers such Interest Rate Certificates and financial statements.
<TABLE>
<CAPTION>
=======================================================================================================
ALTERNATE
TIER LEVERAGE RATIO LIBOR LOANS BASE RATE LOANS
- -------------------------------------------------------------------------------------------------------
Revolving Revolving
Credit Loans/ Credit Loans/
Tranche A Term Tranche B Tranche A Term Tranche B
Loans Term Loans Loans Term Loans
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
I *5.00:1.0 3.00% 3.50% 2.00% 2.50%
- -------------------------------------------------------------------------------------------------------
II *4.50:1.0 but **5.00:1.0 2.75% 3.25% 1.75% 2.25%
- -------------------------------------------------------------------------------------------------------
III *4.00:1.0 but **4.50:1.0 2.50% 3.25% 1.50% 2.25%
- -------------------------------------------------------------------------------------------------------
IV *3.50:1.0 but **4.00:1.0 2.25% 3.25% 1.25% 2.25%
- -------------------------------------------------------------------------------------------------------
V *3.00:1.0 but **3.50:1.0 2.00% 3.25% 1.00% 2.25%
- -------------------------------------------------------------------------------------------------------
VI **3.00:1.0 1.75% 3.25% 0.75% 2.25%
=======================================================================================================
</TABLE>
* Greater than.
** Less than or equal to.
"Applicable Revolving Facility Fee Percentage" shall be (x) from the
--------------------------------------------
Closing Date to the Reset Date, the rate per annum set forth opposite Tier I
--- -----
below, and (y) thereafter, when the Leverage Ratio at the end of the most
recently ended fiscal quarter ending after the Reset Date is as set forth below,
the percentage per annum set forth opposite such Leverage Ratio set forth below.
--- -----
Any change in the Leverage Ratio shall be effective to adjust the Applicable
Revolving Facility Fee Percentage as of the date of receipt by Administrative
Agent of the Interest Rate Certificate most recently delivered pursuant to
Section 9.01(d). If Borrower fails to deliver the Interest Rate Certificates
and financial statements within the times specified in Sections 9.01, such ratio
shall be deemed to be that set forth opposite Tier I below until Borrower
delivers such Interest Rate Certificates and financial statements.
<PAGE>
-4-
<TABLE>
<CAPTION>
=============================================================
TIER LEVERAGE RATIO COMMITMENT FEE
-------------------------------------------------------------
<S> <C> <C>
I *5.00:1.0 0.500%
-------------------------------------------------------------
II *4.50:1.0 but 0.500%
**5:00:1.0
-------------------------------------------------------------
III *4.00:1.0 but 0.500%
**4.50:1.0
-------------------------------------------------------------
IV *3.50:1.0 but 0.375%
**4.00:1.0
-------------------------------------------------------------
V *3.00:1.0 but 0.375%
**3.50:1.0
-------------------------------------------------------------
VI **3.00:1.0 0.375%
=============================================================
</TABLE>
* Greater than.
** Less than or equal to.
"Approved Fund" shall mean, with respect to any Lender that is a fund
-------------
or commingled investment vehicle that invests in loans, any other fund that
invests in loans and is managed or advised by the same investment advisor as
such Lender or by an Affiliate of such investment advisor.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978, as
---------------
amended.
"Benefit Arrangement" shall mean at any time an employee benefit plan
-------------------
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrower" see the introduction to this Agreement.
--------
"Business Day" shall mean any day (a) on which commercial banks are
------------
not authorized or required to close in New York City or San Antonio, Texas and
(b) if such day relates to a borrowing of, a payment or prepayment of principal
of or interest on, a Continuation or Conversion of or into, or an Interest
Period for, a LIBOR Loan or a notice by Borrower with respect to any such
borrowing, payment, prepayment, Continuation, Conversion or Interest Period,
that is also a day on which dealings in Dollar deposits are carried out in the
London interbank market.
"Buyout Group" shall have the meaning set forth in the Merger
------------
Agreement.
"Buyout Group Financing" shall mean the issuance of Common Stock to
----------------------
the Buyout Group and certain other third parties identified to the Joint Lead
Arrangers prior to the Closing Date and acceptable to them to raise gross
proceeds of at least $22.0 million.
"Buyout Group Financing Documents" shall mean the agreements pursuant
--------------------------------
to which Equity Interests of Borrower were issued to the Buyout Group and
certain other third parties and all documents relating thereto.
<PAGE>
-5-
"Capital Expenditures" shall mean, for any period, any direct or
--------------------
indirect (by way of acquisition of securities of a Person or the expenditure of
cash or the incurrences of Indebtedness) expenditures in respect of the purchase
or other acquisition of fixed or capital assets, excluding (i) normal
replacement and maintenance programs properly charged to current operations,
(ii) Acquisitions permitted pursuant to Section 9.09(k), (iii) expenditures in
an amount not to exceed the Net Available Proceeds of any Casualty Event or any
Taking, Destruction or loss of title with respect to Real Property in each case
to the extent such Net Available Proceeds are not required to be applied to the
prepayment of the Loans in accordance with Section 2.10(a)(i) or Section
2.10(a)(v), as applicable, and (vi) the purchase price of equipment to the
extent that the consideration therefor consists of used or surplus equipment
being traded in at such time or the proceeds of a concurrent sale of such used
or surplus equipment in each case in the ordinary course of business.
"Capital Lease," as applied to any Person, shall mean any lease of any
-------------
Property by that Person as lessee which, in conformity with GAAP, is required to
be classified and accounted for as a capital lease on the balance sheet of that
Person.
"Capital Lease Obligations" shall mean, for any Person, all
-------------------------
obligations of such Person to pay rent or other amounts under a Capital Lease,
and, for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP.
"Casualty Event" shall mean, with respect to any Property of any
--------------
Person, any loss of or damage to, or any condemnation or other taking of, such
Property for which such Person or any of its Subsidiaries receives insurance
proceeds or proceeds of a condemnation award or other compensation, including
without limitation, compensation from litigation or in lieu of litigation.
Casualty Event shall not include any Taking or Destruction or loss of title to
Real Property.
"CERCLA" see Section 8.12.
------
"Change in Law" shall mean the introduction of any law or regulation,
-------------
or any change in law or regulation, or the interpretation or administration of
any law.
"Change of Control" shall mean any transaction or event (including,
-----------------
without limitation, an issuance, sale or exchange of capital stock, a merger or
consolidation, or a dissolution or liquidation) occurring on or after the date
hereof (whether or not approved by the board of directors of Borrower) as a
direct or indirect result of which (a) if such transaction or event occurs prior
to the consummation of an Initial Public Offering, (i) the Equity Interests
beneficially owned directly or indirectly by the Permitted Holders, the Buyout
Group, and Liberty fail to constitute collectively, at least a majority, on a
fully diluted basis, of the aggregate then outstanding Equity Interests of
Borrower or voting power of the Equity Interests of Borrower at the time
outstanding or (ii) the Permitted Holders fail to beneficially own, directly or
indirectly, at least 18%, on a fully diluted basis, of the aggregate then
outstanding Equity Interests of Borrower or voting power of the Equity Interests
of Borrower at the time outstanding; (b) any "Person" or any "group" (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended) (other than the Permitted Holders and the Buyout Group) shall
(directly or indirectly) (i) beneficially own in the aggregate Equity Interests
of Borrower having 45% or more of the aggregate voting power of all Equity
Interests of Borrower at the time outstanding, or (ii) have the right or ability
by voting power, contract or otherwise to elect or designate for election a
majority or more of the board of directors of Borrower; (c) during any period of
two consecutive years, individuals who at the beginning of such period
constituted the board of directors of Borrower (together with any new directors
whose election by such board of directors or whose nomination for election by
the shareholders of Borrower was approved by a vote of at least 66-2/3% of the
directors of Borrower then still in office who were either directors at the
begin-
<PAGE>
-6-
ning of such period or whose election or nomination for election was previously
so approved) cease for any reason to constitute at least a majority of the board
of directors of Borrower then in office; or (d) any event or circumstance
constituting a "change of control" or other similar occurrence under (1) the
Subordinated Notes or (2) documentation evidencing or governing any other
Indebtedness of Borrower or any Subsidiary in a principal amount in excess of
$2.0 million (other than under the Credit Documents) shall occur which results
in an obligation of Borrower to prepay, purchase, offer to purchase, redeem or
defease all or a portion of such Indebtedness. For purposes of this definition,
the terms "beneficially own" and "group" shall have the respective meanings
---------------- -----
ascribed to them pursuant to Section 13(d) of the United States Securities
Exchange Act of 1934.
"Class" see Section 1.03.
-----
"Closing Date" shall mean the date upon which the initial extension of
------------
credit hereunder is made (October 30, 1998).
"Code" shall mean the United States Internal Revenue Code of 1986, as
----
amended.
"Collateral" shall mean all of the Pledged Collateral and Mortgaged
----------
Real Property.
"Collateral Account" see Section 4.01 of the Security Agreement.
------------------
"Commitment Letter" shall mean that certain commitment letter among
-----------------
Merrill Lynch Capital Corporation, NationsBank, N.A., NationsBanc Montgomery
Securities LLC and LLC dated September 15, 1998, together with Exhibit A thereto
and incorporated therein.
"Commitments" shall mean the Revolving Credit Commitments and the Term
-----------
Loan Commitments.
"Common Stock" shall mean the common stock of Borrower, no par value.
------------
"Common Stock Financing" shall mean the issuance of Common Stock and
----------------------
Series A Warrants to Liberty to raise gross proceeds of $3.0 million.
"Common Stock Financing Documents" shall mean the purchase agreements
--------------------------------
pursuant to which Common Stock was issued to Liberty and all documents relating
thereto, including but not limited to the Stock and Warrant Purchase Agreement
and Series A Warrant.
"Companies" shall mean the Obligors and their respective Subsidiaries;
---------
and "Company" shall mean any of them.
-------
"Consolidated EBITDA" shall mean, for any Measurement Period, the sum
-------------------
(without duplication) of the amounts for such period of (i) Adjusted Net Income,
(ii) income tax expense to the extent deducted in determining Adjusted Net
Income for such period, (iii) interest expense to the extent deducted in
determining Adjusted Net Income for such period, (iv) depreciation expense and
amortization expense to the extent deducted in determining Adjusted Net Income
for such period, and (v) the non-cash component of any item of expense to the
extent deducted in determining Adjusted Net Income for such period, other than
to the extent requiring an accrual or reserve for actual future cash expenses,
all as determined on a consolidated basis for Borrower and its Consolidated
Subsidiaries.
<PAGE>
-7-
"Consolidated Fixed Charges" shall mean for any period of calculation,
--------------------------
the sum of (i) Consolidated Interest Expense for such period; provided, however,
-------- -------
prior to such time as Borrower shall have delivered financial statements to the
Lenders in respect of four full fiscal quarters after the Closing Date,
Consolidated Interest Expense for any Measurement Period shall be the amount
thereof for such period multiplied by a fraction, the numerator of which is four
and the denominator of which is the number of full fiscal quarters elapsed since
the Closing Date, (ii) the sum of all scheduled principal payments on any
Indebtedness of Borrower and the Subsidiaries for such period, (iii) cash taxes
of Borrower and the Subsidiaries for such period and (iv) accrued dividends on
the PIK Preferred for such period to the extent such dividends are paid in cash.
"Consolidated Interest Expense" shall mean, for any period, for
-----------------------------
Borrower and its Consolidated Subsidiaries (determined on a consolidated basis
without duplication in accordance with GAAP) all cash interest expense in
respect of Indebtedness during such period (whether or not actually paid during
such period).
"Consolidated Rental Payments" shall mean, for any period, the
----------------------------
aggregate amount of all rents paid or to be incurred under all operating leases
of Borrower and its Consolidated Subsidiaries as lessees (net of sublease
income).
"Consolidated Subsidiary" shall mean, for any Person, each Subsidiary
-----------------------
of such Person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated with
the financial statements of such Person in accordance with GAAP.
"Contingent Obligations" shall mean, as to any Person, without
----------------------
duplication, any obligation of such Person guaranteeing or expressly intended to
guarantee by its terms any Indebtedness, leases, dividends or other obligations
("primary obligations") of any other Person (the "primary obligor") in any
------------------- ---------------
manner, whether directly or indirectly, including any "keep-well" or "make-well"
agreement, guarantee of return on equity or other obligation of such Person and
including any obligation of such Person, whether or not contingent, to (a)
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) 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 of the primary obligor, (c) 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) otherwise assure or hold harmless the owner of such primary obligation
against loss in respect thereof; provided, however, that the term Contingent
-------- -------
Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder) as determined by such Person reasonably and in good faith.
"Continue", "Continuation" and "Continued" shall refer to the
-------- ------------ ---------
continuation pursuant to Section 2.09 of a LIBOR Loan from one Interest Period
to the next Interest Period.
"Contractual Obligation" shall mean as to any Person, any provision of
----------------------
any security issued by such Person or of any indenture, credit agreement,
securities purchase agreement, contract, agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
Property is bound or subject.
"Convert", "Conversion" and "Converted" shall refer to a conversion
------- ---------- ---------
pursuant to Section 2.09 of one Type of Loans into another Type of Loans, which
may be accompanied by the transfer by a Lender (at its sole discretion) of a
Loan from one Applicable Lending Office to another.
<PAGE>
-8-
"Covered Taxes" see Section 5.06(a).
-------------
"Credit Documents" shall mean this Agreement, the Notes, the Letter of
----------------
Credit Documents and the Security Documents.
"Creditor" shall mean (i) any Agent, (ii) the Issuing Lender, (iii)
--------
any Lender or (iv) any Person party to a Swap Contract relating to the Loans so
long as at the date of entering into such Swap Contract such Person was a Lender
or an Affiliate of a Lender.
"Debt Issuance" shall mean the incurrence by any Obligor of any
-------------
Indebtedness after the Closing Date (other than as permitted by Section 9.08).
"Default" shall mean any event or condition that constitutes an Event
-------
of Default or that would become, with notice or lapse of time or both an Event
of Default.
"Destruction" shall mean any damage to, or loss or destruction of, any
-----------
Real Property or Mortgaged Real Property. Destruction shall not include any
Casualty Event.
"Disposition" shall mean any conveyance, sale, lease assignment,
-----------
transfer or other disposition (including by way of merger or consolidation and
including any sale-leaseback transaction) of any Property (including shares of
Equity Interests of any Subsidiary of any Company or any joint venture of any
Company) (whether now owned or hereafter acquired) by any Company to any Person
and any liquidating or other non-ordinary course dividend or distribution
received by any Company in respect of any joint venture or similar enterprise,
excluding, however, any Excluded Disposition.
"Disposition Event" shall mean the receipt by any Obligor or any of
-----------------
its Subsidiaries of cash proceeds or cash distributions of any kind from
Property received in consideration for a Disposition.
"Disqualified Capital Stock" shall mean, with respect to any Person,
--------------------------
any Equity Interests of such Person that, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event, matures (excluding any maturity as the result of an
optional redemption by the issuer thereof) or is mandatorily redeemable (other
than solely for Qualified Capital Stock), pursuant to a sinking fund obligation
or otherwise, or is redeemable at the sole option of the holder thereof (other
than solely for Qualified Capital Stock), in whole or in part, on or prior to
the date which is 90 days after the Final Maturity Date.
"Dividend Payment" shall mean dividends (in cash, Property or
----------------
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of Equity Interests of any Company, or of any Equity Rights, but excluding
dividends payable in respect of shares of Qualified Capital Stock through the
issuance of additional shares of Qualified Capital Stock and any redemption or
exchange of any Equity Interests of such Company through the issuance of
Qualified Capital Stock of such Company.
"Domestic Subsidiary" shall mean any Subsidiary that is a U.S. Person
-------------------
and that is a direct Subsidiary of Borrower or another Domestic Subsidiary.
"Dollars" and "$" shall mean lawful money of the United States of
------- -
America.
<PAGE>
-9-
"Eligible Person" shall mean (i) a commercial bank organized under the
---------------
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $250.0 million; (ii) a commercial bank organized under
the laws of any other country that is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
----
country, and having a combined capital and surplus in a dollar equivalent amount
of at least $250.0 million; provided, however, that such bank is acting through
-------- -------
a branch or agency located in the country in which it is organized or another
country that is also a member of the OECD; (iii) an insurance company, mutual
fund entity which is regularly engaged in making, purchasing or investing in
loans or securities or other financial institution organized under the laws of
the United States, any state thereof, any other country that is a member of the
OECD or a political subdivision of any such country with assets, or assets under
management, in a dollar equivalent amount of at least $250.0 million; (iv) any
Affiliate of a Lender; and (v) any other entity (other than a natural person)
which is an "accredited investor" (as defined in Regulation D under the United
States Securities Act of 1933, as amended) which extends credit or buys loans as
one of its businesses, including, but not limited to, insurance companies,
mutual funds and investment funds (with respect to any assignment of Revolving
Credit Commitments, as long as able to make Revolving Credit Loans). With
respect to any Lender that is a fund that invests in loans, any other fund that
invests in loans and is managed or advised by the same investment advisor of
such Lender or by an Affiliate of such investment advisor shall be treated as a
single Eligible Person.
"Environmental Claim" shall mean, with respect to any Person, any
-------------------
written notice, claim, demand or other communication (collectively, a "claim")
-----
by any other Person alleging such Person's liability for any costs, cleanup
costs, governmental response costs, damages to natural resources or other
Property, personal injuries, fines or penalties arising out of or resulting from
(i) the presence, or Release into the environment, of any Hazardous Material at
any location, whether or not owned by such Person, or (ii) any violation of any
Environmental Law. The term "Environmental Claim" shall include any claim by any
-------------------
Person seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from the presence of Hazardous
Materials or arising from alleged injury or threat of injury to health, safety
or the environment.
"Environmental Laws" shall mean any and all present and future
------------------
applicable Federal, state, local and foreign laws, rules or regulations, any
orders, decrees, judgments or injunctions and the common law in each case as now
or hereafter in effect, relating to pollution or protection of human health,
safety or the environment, including without limitation, ambient air, indoor
air, soil, surface water, ground water, wetlands, land or subsurface strata,
including, without limitation, those relating to Releases or threatened Releases
of Hazardous Materials into the environment, or otherwise relating to the
manufacture, processing, generation, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
"Equity Interests" shall mean, with respect to any Person, any and all
----------------
shares, interests, participations or other equivalents, including membership
interests (however designated, whether voting or non-voting), of capital of such
Person, including, if such Person is a partnership, partnership interests
(whether general or limited) and any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, such partnership, whether outstanding on the date
hereof or issued after the Closing Date.
"Equity Issuance" shall mean any of (a) any issuance or sale by any
---------------
Company after the Closing Date of (x) any Equity Interests (including any Equity
Interests issued upon exercise of any Equity Rights) or any Equity Rights, or
(y) any other security or instrument representing an Equity Interest (or the
right to obtain any Equity Interest) in the issuing or selling Person, or (b)
the receipt by any Company after the Closing Date of any capital contribution
(whether or not evidenced by any Equity Interests issued by the recipient of
<PAGE>
-10-
such contribution), excluding any Equity Issuance comprising the issuance of
Equity Interests to the seller or sellers in consideration for an Acquisition.
"Equity Rights" shall mean, with respect to any Person, any
-------------
outstanding subscriptions, options, warrants, commitments, preemptive rights or
agreements of any kind (including any stockholders' or voting trust agreements)
for the issuance, sale, registration or voting of, or outstanding securities
convertible into, any additional shares of Equity Interests of any class, or
partnership or other ownership interests of any type in, such Person.
"ERISA" shall mean the United States Employee Retirement Income
-----
Security Act of 1974, as amended.
"ERISA Group" shall mean each Company and all members of a controlled
-----------
group of corporations and all trades or businesses (whether or not incorporated)
under common control which, together with any Company, are treated as a single
employer under Section 414 of the Code.
"Event of Default" see Section 10.
----------------
"Excess Cash Flow" shall mean, for any period of calculation, the
----------------
remainder of:
(a) the sum, without duplication, of (i) consolidated net income
(loss) of Borrower and its Consolidated Subsidiaries for such period
(calculated by (x) excluding any gains or losses from any Disposition not
in the ordinary course of business or any Excluded Disposition not in the
ordinary course of business (y) adding back the non-cash component of all
extraordinary or non-recurring items of expense and (z) deducting the non-
cash component of all extraordinary or non-recurring items of income, in
each case to the extent taken into account in the calculation of such
consolidated net income), plus (ii) all depreciation and amortization of
----
assets (including goodwill and other intangible assets), non-cash interest
expense and all other non-cash charges of Borrower and its Consolidated
Subsidiaries deducted in determining consolidated net income for such
period, plus (iii) any net decrease in Working Capital (as reflected on the
----
audited consolidated statement of cash flows in accordance with FAS 52)
during such period (exclusive of decreases in Working Capital from any
Disposition or any Excluded Disposition (other than inventory in the
ordinary course of business)), plus (iv) all federal, state, local and
----
foreign income or capital taxes (whether paid or deferred) of Borrower and
its Consolidated Subsidiaries deducted in determining consolidated net
income for such period, minus
-----
(b) the sum, without duplication, of (i) regularly scheduled
installment payments of principal of the Term Loans (other than from Excess
Cash Flow), voluntary prepayments of the Term Loans, the aggregate
principal amount of permanent principal payments with respect to any other
Indebtedness of Borrower and its Consolidated Subsidiaries, prepayments of
the Revolving Credit Loans to the extent of any concurrent permanent
reduction in the Revolving Credit Commitments, and the portion of any
regularly scheduled payments with respect to Capital Leases of Borrower and
its Consolidated Subsidiaries allocable to principal, in each case made
during such period (in any such case other than to the extent any such
payment is made from the proceeds of any Debt Issuance or Equity Issuance
(regardless of any exclusion from the definition thereof), any Disposition
or any Excluded Disposition (other than sales of inventory in the ordinary
course of business) or any insurance proceeds), plus (ii) Capital
----
Expenditures for such period (other than to the extent made from the
proceeds of any Loans or any Debt Issuance or Equity Issuance (regardless
of any exclusion from the definition thereof), any Disposition or any
Excluded Disposition (other than sales of inventory in the ordinary course
of business) or
<PAGE>
-11-
any insurance proceeds), plus (iii) all cash taxes paid by Borrower and its
----
Consolidated Subsidiaries during such period, plus (iv) non-cash charges
----
added back in any previous period pursuant to item (a)(ii) above to the
extent such charge has become a cash item in the current period, plus (v)
----
any net increase in Working Capital (as reflected on the audited
consolidated statement of cash flows in accordance with FAS 52) during such
period (exclusive of increases in Working Capital from any Disposition or
any Excluded Disposition).
"Excluded Dispositions" shall mean (i) Dispositions for fair market
---------------------
value resulting in no more than $1.0 million in proceeds in any fiscal year;
(ii) an exchange of equipment or inventory for like equipment or inventory,
provided that the Person effecting such exchange receives substantially
equivalent value in such exchange for the Property disposed of; (iii) any
transaction permitted by Section 9.06 (other than clause (j)), any Lien
permitted by Section 9.07, any Investment permitted by Section 9.09 and any
Dividend Payment permitted by Section 9.10; (iv) any issuance of Equity
Interests by any Subsidiary to directors to qualify directors if required by
applicable law if resulting in de minimis proceeds; and (v) the sale of
-- -------
inventory in the ordinary course of business.
"Existing Affiliate Agreements" see Section 9.16.
-----------------------------
"Existing Credit Facility" shall mean all of Borrower's Indebtedness
------------------------
under its $125.0 million credit facility arranged by Merrill Lynch.
"Existing Credit Facility Repayment" shall mean the repayment of all
----------------------------------
Indebtedness and termination of all commitments to make extensions of credit
under the Existing Credit Facility.
"Facility" means any of the Revolving Facility, the Term Loan A
--------
Facility and the Term Loan B Facility.
"Federal Funds Rate" shall mean, for any day, the rate per annum
------------------ --- -----
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided, however, that (a) if the day for which such
-------- -------
rate is to be determined is not a Business Day, the Federal Funds Rate for such
day shall be such rate on such transactions on the next preceding Business Day
as so published on the next succeeding Business Day and (b) if such rate is not
so published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate quoted to Administrative Agent on such Business Day on
such transactions by three federal funds brokers of recognized standing, as
determined by Administrative Agent.
"Fee Letter" shall mean the Fee Letter dated September 15, 1998 by and
----------
among Merrill Lynch Capital Corporation, NationsBank, N.A., NationsBanc
Montgomery Securities LLC and LLC.
"Fee Letters" shall mean Administrative Agent's Fee Letter and the Fee
-----------
Letter.
"Final Maturity Date" shall mean October 30, 2004.
-------------------
"Foreign Pension Plan" shall mean any plan, fund (including, without
--------------------
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by any Company primarily for the
benefit of employees of any Company residing outside the United States of
America, which plan, fund or other similar program provides, or results in,
retirement income, a deferral of income in
<PAGE>
-12-
contemplation of retirement or payments to be made upon termination of
employment, and which plan is not subject to ERISA, or any such plan as to which
any Company may have any liability.
"Foreign Subsidiary" shall mean any direct or indirect Subsidiary
------------------
organized outside of the United States as defined in Section 7701(a)(9) of the
Code (or any successor provision) other than Norwood Holdings, C.V.
(Netherlands) and F. Van Der Hoist (Rotterdam) B.V. (Netherlands).
"Funding Date" shall mean the date of the funding of any Loan.
------------
"GAAP" shall mean generally accepted accounting principles set forth
----
as of the relevant date in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the
date of determination.
"Governmental Authority" shall mean any government or political
----------------------
subdivision or any agency, authority, board, bureau, central bank, commission,
department or instrumentality of either, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantee" shall mean the guarantee of each Subsidiary Guarantor
---------
pursuant to Section 6.
"Guaranteed Obligations" see Section 6.01.
----------------------
"Hardship" means certain facts and circumstances, such as a medical
--------
emergency concerning any current holder of Common Stock (who are current
employees of Borrower) or his immediate family or any current holder of Common
Stock, (who are current employees of Borrower) need to pay educational expenses
such as college tuition, as a result of which any current holder of Common Stock
(who is a current employee of Borrower prior to such event) or spouses or other
heirs of such employee requests Borrower or the other holders of Common Stock to
buy all or some of his Common Stock, which request the Board of Directors of
Borrower (or a designated committee thereof) will permit or deny in its sole
discretion.
"Hazardous Material" shall mean any pollutant, contaminant, toxic,
------------------
hazardous or extremely hazardous substance, constituent or waste, or any other
constituent, waste, material, compound or substance including, without
limitation, petroleum including crude oil or any fraction thereof, or any
petroleum product, subject to regulation under any Environmental Law.
"Indebtedness" shall mean, for any Person, without duplication, (a)
------------
all indebtedness for borrowed money of such Person; (b) all obligations issued,
undertaken or assumed by such Person as the deferred purchase price of Property
or services (other than trade payables and accrued expenses not overdue by more
than 60 days incurred in the ordinary course of business on ordinary terms or
contested in good faith); (c) all non-contingent reimbursement or payment
obligations of such Person with respect to Surety Instruments (such as, for
example, unpaid reimbursement obligations in respect of a drawing under a letter
of credit); (d) all obligations of such Person evidenced by notes, bonds,
debentures or similar instruments, including obligations so evidenced incurred
in connection with the acquisition of Property or businesses; (e) all
indebtedness of such Person created or arising under any conditional sale or
other title retention agreement, or incurred as financing, in either case with
respect to Property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such Property); (f) all Capital
<PAGE>
-13-
Lease Obligations of such Person; (g) all net obligations of such Person with
respect to Swap Contracts (such obligations to be equal at any time to the
aggregate net amount that would have been payable by such Person at the most
recent fiscal quarter end in connection with the termination of such Swap
Contracts at such fiscal quarter end); (h) all indebtedness of other Persons
referred to in clauses (a) through (g) 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 accounts and contracts
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such indebtedness, limited to the lesser of such
indebtedness or the value of such property; and (j) all Contingent Obligations
of such Person in respect of indebtedness or obligations of others of the kinds
referred to in clauses (a) through (h) above. Indebtedness shall not include
accounts extended by suppliers in the ordinary course of business on normal
trade terms in connection with the purchase of goods and services. The
Indebtedness of any Person shall include any Indebtedness of any partnership in
which such Person is the general partner.
"Indemnitee" see Section 12.03.
----------
"Initial Public Offering" shall mean a primary underwritten public
-----------------------
offering of the common stock of Borrower, other than any public offering or sale
pursuant to a registration statement on Form S-8 or a comparable form.
"Intellectual Property" see Section 8.22.
---------------------
"Intercompany Note" shall mean a promissory note substantially in the
-----------------
form of Exhibit B.
---------
"Interest Coverage Ratio" shall mean, for any Measurement Period, the
-----------------------
ratio of (x) Consolidated EBITDA for such period to (y) Consolidated Interest
Expense for such period. Prior to such time as Borrower shall have delivered
financial statements to the Lenders in respect of four full fiscal quarters
after the Closing Date, Consolidated Interest Expense for any Measurement Period
shall be the amount thereof for such period multiplied by a fraction, the
numerator of which is four and the denominator of which is the number of full
fiscal quarters elapsed since the Closing Date.
"Interest Period" shall mean, with respect to any LIBOR Loan, each
---------------
period commencing on the date such LIBOR Loan is made or Converted from an
Alternate Base Rate Loan or the last day of the next preceding Interest Period
for such LIBOR Loan and (subject to the requirements of Sections 2.01(a),
2.01(b) and 2.09) ending on the numerically corresponding day in the first,
second, third or sixth calendar month thereafter, as Borrower may select as
provided in Section 4.05, except that each Interest Period that commences on the
last Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) if any Interest Period for any Revolving
Credit Loan would otherwise end after the Revolving Credit Commitment
Termination Date, such Interest Period shall end on the Revolving Credit
Commitment Termination Date; (ii) no Interest Period for any Term Loan may
commence before and end after any Principal Payment Date, unless, after giving
effect thereto, the aggregate principal amount of the Term Loans having Interest
Periods that end after such Principal Payment Date shall be equal to or less
than the aggregate principal amount of the Term Loans scheduled to be
outstanding after giving effect to the payments of principal required to be made
on such Principal Payment Date; (iii) each Interest Period that would otherwise
end on a day that is not a Business Day shall end on the next succeeding
Business Day (or, if such next succeeding Business Day falls in the next
succeeding calendar month, on the next preceding Business Day); and (iv)
notwithstanding clause (i) above, no Interest Period shall have a duration of
less than one month and, if
<PAGE>
-14-
the Interest Period for any LIBOR Loan would otherwise be a shorter period, such
Loan shall not be available hereunder as a LIBOR Loan for such period.
"Interest Rate Certificate" shall mean an Officers' Certificate
-------------------------
substantially in the form of Exhibit C, delivered pursuant to Section 9.01(d),
---------
demonstrating in reasonable detail the calculation of the Leverage Ratio as of
the last day of the Measurement Period then last ended on or immediately prior
to the date such certificate is required to be delivered.
"Investment" shall mean, for any Person: (a) the acquisition (whether
----------
for cash, Property, services or securities or otherwise) of assets, Equity
Interests, bonds, notes, debentures, partnership or other ownership interests or
other securities of any other Person; (b) the making of any deposit with, or
advance, loan or other extension of credit to, any other Person (including the
purchase of Property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such Property to such Person); (c)
any capital contribution to (by means of any transfer of cash or other Property
to others or any payment for Property or services for the account or use of
others) any other Person; (d) the entering into, or direct or indirect
incurrence, of any Contingent Obligation with respect to Indebtedness or other
liability of any other Person; (e) the entering into of any Swap Contract; or
(e) any agreement to make any Investment (including any "short sale" or any sale
of any securities at a time when such securities are not owned by the Person
entering into such sale).
"Issuing Lender" shall mean NationsBank, N.A. or any of its
--------------
Affiliates, or such other Lender or Lenders selected by Administrative Agent
reasonably satisfactory to Borrower, as the issuer of Letters of Credit under
Section 2.03, together with its successors and assigns in such capacity.
"Joint Lead Arrangers" see the introduction to this Agreement.
--------------------
"Krasovec" shall mean Frank Krasovec, a natural Person resident in the
--------
state of Texas on the date hereof and the Chairman of the Board of Borrower on
the date hereof.
"Lease" shall mean any lease, sublease, franchise agreement, license,
-----
occupancy or concession agreement.
"Lender" and "Lenders" see the introduction to this Agreement.
------ -------
"Letter of Credit" see Section 2.03.
----------------
"Letter of Credit Documents" shall mean, with respect to any Letter of
--------------------------
Credit, collectively, any other agreements, instruments, guarantees or other
documents (whether general in application or applicable only to such Letter of
Credit) governing or providing for (a) the rights and obligations of the parties
concerned or at risk with respect to such Letter of Credit or (b) any collateral
security for any of such obligations, each as the same may be modified and
supplemented and in effect from time to time.
"Letter of Credit Interest" shall mean, for each Revolving Credit
-------------------------
Lender, such Lender's participation interest (or, in the case of the Issuing
Lender, the Issuing Lender's retained interest) in the Issuing Lender's
liability under Letters of Credit and such Lender's rights and interests in
Reimbursement Obligations and fees, interest and other amounts payable in
connection with Letters of Credit and Reimbursement Obligations.
<PAGE>
-15-
"Letter of Credit Liability" shall mean, without duplication, at any
--------------------------
time and in respect of any Letter of Credit, the sum of (a) the undrawn face
amount of such Letter of Credit, plus (b) the aggregate unpaid principal amount
----
of all Reimbursement Obligations of Borrower at such time due and payable in
respect of all drawings made under such Letter of Credit.
"Leverage Ratio" shall mean, at any date, the ratio of (x) Total Debt
--------------
at such date to (y) Consolidated EBITDA for the Measurement Period ended on or,
if a Measurement Period does not end on such date, immediately prior to such
date.
"Liberty" shall mean Liberty Partners Holdings 17, L.L.C., a limited
-------
liability company organized under the laws of Delaware.
"LIBOR Base Rate" shall mean, with respect to any LIBOR Loan for any
---------------
Interest Period therefor, the rate per annum at which the Lender which is
--- -----
Administrative Agent is offered deposits in Dollars at approximately 11:00 a.m.
London time (or as soon thereafter as practicable) on the date two Business Days
prior to the first day of such Interest Period in the London interbank market
for delivery on the first day of such Interest Period, for the number of days
comprised therein and in an amount comparable to its portion of the amount of
the LIBOR Loans to be outstanding during such Interest Period.
"LIBOR Loans" shall mean Loans that bear interest at rates based on
-----------
rates referred to in the definition of "LIBOR Base Rate" in this Section 1.01.
"LIBOR Rate" shall mean, for any LIBOR Loan for any Interest Period
----------
therefor, a rate per annum (rounded upwards, if necessary, to the nearest 1/100
--- -----
of 1%) determined by Administrative Agent to be equal to the LIBOR Base Rate for
such Loan for such Interest Period divided by 1 minus the Reserve Requirement
(if any) for such Loan for such Interest Period.
"Lien" shall mean, with respect to any Property, any mortgage, lien,
----
pledge, claim, charge, security interest or encumbrance of any kind, or any
other type of preferential arrangement in respect of such Property, including
any easement, right-of-way or other encumbrance on title to Real Property. For
purposes of the Credit Documents, a Person shall be deemed to own subject to a
Lien any Property that it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement (other than an operating lease) relating to such
Property.
"LLC" shall mean FPK, LLC, a Delaware limited liability company formed
---
by Krasovec.
"Loans" shall mean the Revolving Credit Loans and the Term Loans.
-----
"Losses" of any Person shall mean the losses, liabilities, claims
------
(including those based upon negligence, strict or absolute liability and
liability in tort), damages, reasonable expenses, obligations, penalties,
actions, judgments, encumbrances, liens, penalties, fines, suits, reasonable and
documented costs or disbursements of any kind or nature whatsoever (including
reasonable fees and expenses of counsel in connection with any Proceeding
commenced or threatened in writing, whether or not such Person shall be
designated a party thereto) at any time (including following the payment of the
Obligations) incurred by, imposed on or asserted against such Person.
"Majority Lenders" shall mean (i) at any time prior to the Closing
----------------
Date, Lenders holding at least a majority of the aggregate amount of the
Commitments, and (ii) at any time after the Closing Date, Lend-
<PAGE>
-16-
ers holding at least a majority of the sum of (without duplication) (a) the
aggregate principal amount of outstanding Loans (other than Swing Loans), plus
----
(b) the aggregate amount of all Letter of Credit Liabilities, plus (c) the
aggregate Unutilized Revolving Credit Commitments then in effect, plus (d) the
----
aggregate Unutilized Term Loan Commitments, plus (e) the aggregate amount of
----
Swing Loans then outstanding.
"Majority Revolving Credit Lenders" shall mean (i) at any time prior
---------------------------------
to the Closing Date, Lenders holding at least a majority of the aggregate amount
of the Revolving Credit Commitments and (ii) at any time after the Closing Date,
Lenders holding at least a majority of the sum of (without duplication) (a) the
aggregate principal amount of outstanding Revolving Credit Loans, plus (b) the
----
aggregate amount of all Letter of Credit Liabilities, plus (c) the aggregate
----
Unutilized Revolving Credit Commitments then in effect, plus (d) in the case of
----
the Swing Loan Lenders only, the aggregate amount of Swing Loans then
outstanding.
"Majority Term Lenders" shall mean (i) at any time prior to the
---------------------
Closing Date, Lenders holding at least a majority of the Term Loan Commitments,
and (ii) at any time after the Closing Date, Lenders holding at least a majority
of the sum of (a) the aggregate principal amount of outstanding Term Loans plus
----
(b) the aggregate Unutilized Term Loan Commitments.
"Majority Tranche A Term Lenders" shall mean (i) at any time prior to
-------------------------------
the Closing Date, Lenders holding at least a majority of the Tranche A Term Loan
Commitments, and (ii) at any time after the Closing Date, Lenders holding at
least a majority of (a) the aggregate principal amount of outstanding Tranche A
Term Loans, plus (b) the aggregate Unutilized Term Loan Commitments held by all
----
Tranche A Term Loan Lenders.
"Majority Tranche B Term Lenders" shall mean (i) at any time prior to
-------------------------------
the Closing Date, Lenders holding at least a majority of the Tranche B Term Loan
Commitments, and (ii) at any time after the Closing Date, Lenders holding at
least a majority of (a) the aggregate principal amount of outstanding Tranche B
Term Loans, plus (b) the aggregate Unutilized Term Loan Commitments held by all
----
Tranche B Term Loan Lenders.
"Margin Stock" shall mean margin stock within the meaning of
------------
Regulations T, U and X.
"Material Adverse Effect" shall mean any of (a) a material adverse
-----------------------
effect on the business, assets, properties, liabilities (contingent or
otherwise), results of operations, condition (financial or otherwise),
prospects, solvency or material agreements of Borrower, individually or together
with the Subsidiaries taken as a whole, or (b) a material adverse effect on the
legality, binding effect or enforceability of any Credit Document or affecting
the rights and remedies of the Lenders thereunder. In determining whether the
occurrence of any individual event or the existence of any individual condition
would, or the failure of any individual event to occur or any individual
condition to exist would, have a Material Adverse Effect, notwithstanding that
the occurrence of such individual event or the existence of such individual
condition does not, or the failure to occur of such individual event or such
individual condition to exist does not, of itself have such effect, a Material
Adverse Effect shall be deemed to have occurred if the cumulative effect of such
event or condition or failure of event or condition and all other then existing
events or conditions and failures of events or conditions have a Material
Adverse Effect.
"Material Plan" means at any time a Plan or Plans having aggregate
-------------
Unfunded Liabilities in excess of $1.0 million.
<PAGE>
-17-
"Measurement Period" shall mean the most recent four full fiscal
------------------
quarters of Borrower for which financial statements have been provided pursuant
to Section 9.01.
"Merger" shall mean the merger of Newco with and into Borrower
------
pursuant to the Merger Agreement with Borrower as the survivor.
"Merger Agreement" shall mean the Agreement and Plan of Merger dated
----------------
March 15, 1998 between LLC and Borrower and all schedules, annexes, appendices
and exhibits thereto and all agreements entered into in connection therewith as
amended by a letter amendment dated September 18, 1998 between LLC and Borrower.
"Mortgage" shall mean an agreement creating and evidencing a Lien on a
--------
Mortgaged Real Property, which shall be substantially in the form of Exhibit G,
---------
containing such schedules and including such additional provisions and other
deviations from such Exhibit as shall be necessary to conform such document to
applicable or local law or as shall be customary under local law, as the same
may at any time be amended, modified or supplemented in accordance with the
terms thereof and hereof.
"Mortgaged Real Property" shall mean each Real Property which shall be
-----------------------
subject to a Mortgage delivered on the Closing Date or thereafter pursuant to
Section 9.12.
"Multiemployer Plan" shall mean at any time an employee pension
------------------
benefit plan within the meaning of Section 4001(a)(3) of ERISA (i) to which any
member of the ERISA Group is then making or accruing an obligation to make
contributions, (ii) to which any member of the ERISA Group has within the
preceding five plan years made contributions, including for these purposes any
Person which ceased to be a member of the ERISA Group during such five year
period, or (iii) with respect to which any Company could incur liability.
"NAIC" shall mean the National Association of Insurance Commissioners.
----
"Net Available Proceeds" shall mean:
----------------------
(i) in the case of any Disposition Event, the amount of Net Cash
Payments received by any Company in connection with such Disposition Event;
(ii) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation received
by any Company in respect of such Casualty Event net of (A) reasonable
expenses incurred by such Obligor and its Subsidiaries in connection with
recovery thereof, (B) repayments of Indebtedness (other than Indebtedness
hereunder) to the extent secured by a Lien on such Property that is
permitted hereunder or under the applicable Security Document and (C) any
income and transfer taxes payable by any Company in respect of amounts so
recovered;
(iii) in the case of any Equity Issuance or any Debt Issuance, the
aggregate amount of all cash received by any Company in respect thereof net
of all reasonable investment banking fees, discounts and commissions, legal
fees, consulting fees, accountants' fees, underwriting discounts and
commissions and other customary fees and expenses, actually incurred and
satisfactorily documented in connection therewith;
<PAGE>
-18-
(iv) in the case of any Taking or Destruction, the Net Award or Net
Proceeds, as applicable, resulting therefrom; and
(v) with respect to any loss of title to all or any portion of any
Mortgaged Real Property or Real Property, any title insurance proceeds
resulting therefrom.
"Net Award" shall mean the proceeds, award or payment received by any
---------
Obligor or any of its Subsidiaries in respect of any Taking, together with any
interest thereon, less the amount of any reasonable expenses incurred in
litigating, arbitrating, compromising or settling any claim arising out of any
such Taking.
"Net Cash Payments" shall mean, with respect to any Disposition Event,
-----------------
the aggregate amount of all cash payments (including any cash payments received
by way of deferred payment of principal pursuant to a note or installment
receivable or purchase price adjustment receivable or otherwise, but only as and
when received) received by any Company directly or indirectly in connection with
such Disposition Event; provided, however, that Net Cash Payments shall be net
-------- -------
(without duplication) of (i) the amount of all reasonable fees and expenses paid
by any Company in connection with such Disposition Event (the "Relevant
--------
Disposition"); (ii) any taxes paid or estimated to be payable by any Obligor and
- -----------
its Subsidiaries as a result of the Relevant Disposition; (iii) any repayments
by any Company of Indebtedness other than the Obligations to the extent that (a)
such Indebtedness is secured by a Lien on the Property that is the subject of
the Relevant Disposition that is permitted hereunder or under the applicable
Security Document and (b) the transferee of (or holder of a Lien on) such
Property requires that such Indebtedness be repaid as a condition to the
purchase of such Property; and (iv) amounts required to be paid to any Person
(other than any Company) owning a beneficial interest in the assets subject to
such Relevant Disposition.
"Net Proceeds" shall mean the proceeds of any insurance or other
------------
payment received by any Company in connection with any Destruction, together
with any interest earned thereon, less the amount of any reasonable expenses
incurred in litigating, arbitrating, compromising or settling any claim arising
out of such Destruction.
"Newco" shall mean a new corporation formed by LLC, in which pursuant
-----
to the Merger Agreement, Newco will merge with and into Borrower with Borrower
as the survivor.
"Non-U.S. Lender" see Section 5.06(b).
---------------
"Notes" shall mean the Revolving Credit Notes, the Term Loan Notes and
-----
the Swing Loan Note.
"Notice of Assignment" shall mean a notice of assignment pursuant to
--------------------
Section 12.06 substantially in the form of Exhibit F.
---------
"Notice of Borrowing" shall mean a notice of borrowing substantially
-------------------
in the form of Exhibit I.
---------
"Obligations" shall mean all amounts, direct or indirect, contingent
-----------
or absolute, of every type or description, and at any time existing, owing to
any Creditor or any of its Related Parties or their respective successors,
transferees or assignees pursuant to the terms of any Credit Document or secured
by any of the Security Documents, whether or not the right of such Person to
payment in respect of such obligations and liabilities is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed,
<PAGE>
-19-
legal, equitable, secured or unsecured and whether or not such claim is
discharged, stayed or otherwise affected by any bankruptcy case or insolvency or
liquidation proceeding
"Obligors" shall mean Borrower and the Subsidiary Guarantors.
--------
"Officers' Certificate" shall mean, as applied to any corporation, a
---------------------
certificate executed on behalf of such corporation by its Chairman of the Board
(if an officer) or its Chief Executive Officer or one of its Vice Presidents or
its Chief Financial Officer, or its Treasurer or any Assistant Treasurer in
their official (and not individual) capacities; provided, however, that every
-------- -------
Officers' Certificate with respect to the compliance with a condition precedent
to the making of any Loan or the taking of any other action hereunder shall
include (i) a statement that the officers making or giving such Officers'
Certificate have read such condition and any definitions or other provisions
contained in this Agreement relating thereto, and (ii) a statement as to
whether, in the opinion of the signers, such condition has been complied with.
"Option" see Section 2.09.
------
"Original Lenders" shall mean the Lenders named on the signature pages
----------------
hereof who were Lenders at the Closing Date.
"Other Taxes" see Section 5.06(c).
-----------
"Payor" see Section 4.06.
-----
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
----
successor thereto.
"Permitted Holders" shall mean Krasovec and his Permitted Transferees.
-----------------
"Permitted Investments" shall mean, for any Person: (a) direct
---------------------
obligations of the United States of America, or of any agency thereof, or
obligations guaranteed as to principal and interest by the United States of
America, or by any agency thereof, in either case maturing not more than one
year from the date of acquisition thereof by such Person; (b) time deposits,
certificates of deposit, bankers' acceptances (including eurodollar deposits)
issued by any bank or trust company organized under the laws of the United
States of America or any state thereof and having capital, surplus and undivided
profits of at least $500.0 million and a deposit rating of investment grade; (c)
commercial paper rated A-1 or better by Standard & Poor's Corporation or P-1 or
better by Moody's Investors Service, Inc., respectively, maturing not more than
180 days from the date of acquisition thereof by such Person; and (d) money
market mutual funds that invest primarily in the foregoing items.
"Permitted Liens" see Section 9.07.
---------------
"Permitted Transferee" shall mean with respect to any natural Person,
--------------------
(i) such individual's spouse or children (natural or adopted), any trust for
such individual's benefit or the benefit of such individual's spouse or children
(natural or adopted), or any corporation or partnership in which the direct and
beneficial owner of all of the equity interest is such Person or such
individual's spouse or children (natural or adopted) or any trust for the
benefit of such Persons; (ii) a charitable trust or foundation (as defined in
the Code) created by such Person for charitable purposes; and (iii) the heirs,
executors, administrators or personal representatives upon the death of such
Person or upon the incompetency or disability of such Person for purposes of the
protection and management of such individual's assets.
<PAGE>
-20-
"Permitted Refinancing" shall mean, with respect to any Indebtedness,
---------------------
any refinancing thereof, provided, however, that (w) no Default shall have
occurred and be continuing or would arise therefrom, (x) any such refinancing
Indebtedness shall (I) not be on financial and other terms that are more onerous
than the Indebtedness being refinanced and shall not have defaults, rights or
remedies more burdensome to the obligor than the Indebtedness being refinanced,
(II) not have a stated maturity or weighted average life that is shorter than
the Indebtedness being refinanced, (III) be at least as subordinate to the
Obligations as the Indebtedness being refinanced (and unsecured if the
refinanced Indebtedness is unsecured), and (IV) be in principal amount that does
not exceed the principal amount so refinanced, plus the lesser of (1) the stated
amount of any premium or other payment required to be paid in connection with
such refinancing pursuant to the terms of the Indebtedness being refinanced and
(2) the amount of premium or other payment actually paid at such time to
refinance the Indebtedness, plus, in either case, the amount of reasonable
expenses of any Company incurred in connection with such refinancing, and (y)
the sole obligor on such refinancing Indebtedness shall be the original obligor
on such Indebtedness being refinanced (with any guarantor on the Indebtedness
being refinanced permitted to guarantee the refinancing Indebtedness and
Borrower likewise permitted to guarantee such refinancing Indebtedness of
Subsidiary Guarantors).
"Person" shall mean any individual, corporation, company, voluntary
------
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"PIK Preferred Stock" shall mean the issuance by Borrower to SBAF of
-------------------
its pay-in-kind preferred stock and Series B Warrants to raise gross proceeds of
up to $20.0 million.
"PIK Preferred Documents" shall mean the certificate of designation
-----------------------
relating to the PIK Preferred and all documents relating thereto (including, but
not limited to, the registration rights, the Stock and Warrant Purchase
Agreement and Series B Warrants relating thereto); as any such documents may be
amended from time to time in accordance with its terms and this Agreement.
"Plan" shall mean at any time an employee pension benefit plan (other
----
than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Code and either (i) is
maintained, or contributed to, by any member of the ERISA Group for employees of
any member of the ERISA Group, (ii) has at any time within the preceding five
years been maintained, or contributed to, by any Person which was at such time a
member of the ERISA Group for employees of any Person which was at such time a
member of the ERISA Group, or (iii) with respect to which the Borrower or a
Subsidiary could incur liability.
"Pledged Collateral" shall have the meaning set forth in the Security
------------------
Agreement.
"Post-Default Rate" shall mean, in respect of any principal of any
-----------------
Loan, any Reimbursement Obligation or any other amount payable under this
Agreement, any Note or any other Credit Document that is not paid when due
(whether at stated maturity, by acceleration, by optional or mandatory
prepayment or otherwise), a rate per annum during the period from and including
--- -----
the due date to but excluding the date on which such amount is paid in full
equal to 2%, plus the Alternate Base Rate as in effect from time to time, plus
---- ----
the Applicable Margin for Alternate Base Rate Loans; provided, however, that, if
-------- -------
the amount so in default is principal of a LIBOR Loan and the due date thereof
is a day other than the last day of the Interest Period therefor, the "Post-
Default Rate" for such principal shall be, for the period from and including
such due date to but excluding the last day of such Interest Period, 2%, plus
----
the interest rate for such Loan as provided in Section 3.02(b) and, thereafter,
the rate provided for above in this definition.
<PAGE>
-21-
"Preferred Stock Financing" shall mean the financing pursuant to the
-------------------------
PIK Preferred Stock offering and the PIK Preferred Documents.
"Prime Rate" shall be the rate most recently announced by NationsBank,
----------
N.A. at its Principal Office as its "Prime Rate." Prime Rate is one of
NationsBank, N.A.'s base rates and serves as the basis upon which effective
rates of interest are calculated for those loans making reference thereto, and
is evidenced by the reporting thereof after its announcement in such internal
publication or publications as NationsBank, N.A. may designate. Any change in
the interest rate resulting from a change in such Prime Rate shall become
effective on the Business Day on which each change in Prime Rate is announced by
NationsBank, N.A.
"Principal Office" shall mean the principal office of Administrative
----------------
Agent, located on the date hereof in St. Louis, Missouri.
"Principal Payment Date" shall mean (i) the Quarterly Dates commencing
----------------------
with the last Business Day of February 1999 through and including the last
Business Day of August 2004.
"Prior Liens" shall mean Liens which, pursuant to the provisions of
-----------
any Security Document, are or may be superior to the Lien of such Security
Document.
"Proceeding" shall mean any claim, counterclaim, action, judgment,
----------
suit, hearing, governmental investigation, arbitration or proceeding, including
by or before any Governmental Authority.
"Profit Payment Agreement" shall mean any agreement to make any
------------------------
payment the amount of which is, or the terms of payment of which are, in any
respect subject to or contingent upon the revenues, income, cash flow or profits
(or the like) of any Person or business.
"Property" shall mean any right, title or interest in or to property
--------
or assets of any kind whatsoever, whether real, personal or mixed and whether
tangible or intangible and including capital stock or other ownership interests
of any Person.
"Qualified Capital Stock" shall mean with respect to any Person any
-----------------------
Equity Interests of such Person which is not Disqualified Capital Stock.
"Qualified Subsidiary" shall mean any Wholly Owned Subsidiary of
--------------------
Borrower that is an Obligor.
"Quarterly Dates" shall mean the last Business Day of February, May,
---------------
August and November in each year, commencing with the last Business Day of
February 1999.
"Real Property" shall mean all right, title and interest of any
-------------
Company (including, without limitation, any leasehold estate) in and to a parcel
of real property owned or operated by any Company together with, in each case,
all improvements and appurtenant fixtures, equipment, personal property,
easements and other property and rights incidental to the ownership, lease or
operation thereof.
"Recapitalization" shall mean the formation of Newco by LLC, the
----------------
Merger, and the transactions contemplated thereby in which after giving effect
thereto, the Permitted Holders, the Buyout Group and Liberty will own all of the
Equity Interests of Borrower.
<PAGE>
-22-
"Recapitalization Documents" shall mean the Merger Agreement, the PIK
--------------------------
Preferred Documents, the Subordinated Note Documents, the Common Stock Financing
Documents, the Buyout Group Financing Documents, any other operative document
relating to the Recapitalization and each of the Related Documents with respect
thereto, in each case, including all schedules, exhibits, appendices, annexes
and attachments and amendments thereto and, in each case, as amended and in
effect from time to time in accordance with their respective terms and this
Agreement.
"redeem" shall mean redeem, repurchase, repay, defease or otherwise
------
acquire or retire for value; and "redemption" and "redeemed" have correlative
---------- --------
meanings.
"refinance" shall mean refinance, renew, extend, replace, defease or
---------
refund, in whole or in part, including successively; and "refinancing" and
-----------
"refinanced" have correlative meanings.
- -----------
"Register" see Section 2.08.
--------
"Regulation D" shall mean Regulation D of the Board of Governors of
------------
the Federal Reserve System.
"Regulations T, U and X" shall mean, respectively, Regulations T, U
----------------------
and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from time
to time.
"Regulatory Change" shall mean, with respect to any Lender, any change
-----------------
after the date hereof in Federal, state or foreign law or regulations (including
Regulation D) or the adoption or making after such date of any interpretation,
directive or request applying to a class of banks or other financial
institutions including such Lender of or under any Federal, state or foreign law
or regulations (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) by any court or governmental or
monetary authority or any other regulatory agency with proper authority,
including non-governmental agencies or bodies, charged with the interpretation
or administration thereof or by the NAIC.
"Reimbursement Obligations" shall mean, at any time, the obligations
-------------------------
of Borrower then outstanding, or that may thereafter arise in respect of all
Letters of Credit then outstanding, to reimburse amounts paid by the Issuing
Lender in respect of any drawings under a Letter of Credit.
"Related Documents" shall mean any agreement, document or instrument
-----------------
entered into by any Obligor in connection with any Recapitalization Document, as
any such agreement, document or instrument is amended and in effect from time to
time in accordance with its respective terms and this Agreement.
"Related Parties" see Section 11.01.
---------------
"Release" shall mean any release, spill, emission, leaking, pumping,
-------
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the environment.
"Replaced Lender" see Section 2.11.
---------------
"Replacement Lender" see Section 2.11.
------------------
"Required Payment" see Section 4.06.
----------------
<PAGE>
-23-
"Requirement of Law" shall mean as to any Person, the Certificate of
------------------
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.
"Reserve Requirement" shall mean, for any Interest Period for any
-------------------
LIBOR Loan, the average maximum rate (expressed as a percentage) at which
reserves (including any marginal, supplemental or emergency reserves) are
required to be maintained during such Interest Period under Regulation D by
member banks of the Federal Reserve System in New York City with deposits
exceeding one billion Dollars against "Eurocurrency liabilities" (as such term
is used in Regulation D). Without limiting the effect of the foregoing, the
Reserve Requirement shall include any other reserves required to be maintained
by such member banks by reason of any Regulatory Change with respect to (i) any
category of liabilities that includes deposits by reference to which the LIBOR
Base Rate is to be determined as provided in the definition of "LIBOR Base Rate"
in this Section 1.01 or (ii) any category of extensions of credit or other
assets that includes LIBOR Loans.
"Reset Date" see the definition of Applicable Margin.
----------
"Restoration" see each Mortgage.
-----------
"Revolving Credit Commitment" shall mean, for each Revolving Credit
---------------------------
Lender, the obligation of such Lender to make Revolving Credit Loans in an
aggregate principal amount at any one time outstanding up to but not exceeding
the amount set opposite the name of such Lender on Annex A under the caption
-------
"Revolving Credit Commitment" (as the same may be reduced from time to time
pursuant to Section 2.04(b) or changed pursuant to Section 12.06(b)). The
initial aggregate principal amount of the Revolving Credit Commitments is $25.0
million.
"Revolving Credit Commitment Percentage" shall mean, with respect to
--------------------------------------
any Revolving Credit Lender, the ratio of (a) the amount of the Revolving Credit
Commitment of such Lender to (b) the aggregate amount of the Revolving Credit
Commitments of all of the Lenders.
"Revolving Credit Commitment Termination Date" shall mean the Business
--------------------------------------------
Day immediately prior to the fifth anniversary of the Closing Date.
"Revolving Credit Commitments" shall mean the aggregate sum of the
----------------------------
Revolving Credit Commitment of all of the Revolving Credit Lenders.
"Revolving Credit Facility" shall mean the credit facility comprising
-------------------------
the Revolving Credit Commitments.
"Revolving Credit Lenders" shall mean (a) on the date hereof, the
------------------------
Lenders having Revolving Credit Commitments on the signature pages hereof and
(b) thereafter, the Lenders from time to time holding Revolving Credit Loans and
Revolving Credit Commitments after giving effect to any assignments thereof
permitted by Section 12.06(b).
"Revolving Credit Loans" see Section 2.01(a).
----------------------
<PAGE>
-24-
"Revolving Credit Notes" shall mean the promissory notes provided for
----------------------
by Section 2.08(a) and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time.
"SBAF" shall mean the State Board of Administration of Florida.
----
"Section 5.06 Certificate" see Section 5.06(b).
------------------------
"Security Agreement" shall mean a Security Agreement substantially in
------------------
the form of Exhibit D among the Obligors and Administrative Agent, as the same
---------
may be amended, modified or supplemented in accordance with the terms thereof
and hereof.
"Security Documents" shall mean the Security Agreement, the Mortgages
------------------
and all Uniform Commercial Code financing statements required by this Agreement,
the Security Agreement or any Mortgage to be filed with respect to the security
interests in Property and fixtures created pursuant to the Security Agreement or
any Mortgage and any other document or instrument utilized to pledge as
Collateral for the Obligations any property or assets of whatever kind or
nature.
"Senior Debt" shall mean, at any date, Total Debt less Subordinated
-----------
Debt.
"Senior Debt Leverage Ratio" shall mean, at any date, the ratio of (x)
--------------------------
Senior Debt at such date to (y) Consolidated EBITDA for the Measurement Period
ended on or, if a Measurement Period does not end on such date, immediately
prior to such date.
"Series A Warrants" shall mean warrants to be issued to Liberty
-----------------
pursuant to the Stock and Warrant Purchase Agreement in connection with the
purchase of Subordinated Debt by SBAF.
"Series B Warrants" shall mean warrants to be issued to Liberty in
-----------------
connection with the purchase of PIK Preferred Stock by SBAF pursuant to the
Stock and Warrant Purchase Agreement.
"State and Local Real Property Disclosure Requirements" shall mean any
-----------------------------------------------------
state or local laws requiring notification of the buyer of real property, or
notification, registration, or filing to or with any state or local agency,
prior to the sale of any real property or transfer of control of an
establishment, of the actual or threatened presence or release into the
environment, or the use, disposal, or handling of Hazardous Materials on, at,
under, or near the real property to be sold or the establishment for which
control is to be transferred.
"Stock and Warrant Purchase Agreement" shall mean the agreement among
------------------------------------
SBAF, Liberty and Borrower dated October 30, 1998 whereby Borrower agrees to
sell to (1) SBAF, PIK Preferred Stock and (2) Liberty, Common Stock, PIK
Preferred Stock, Series A Warrants in connection with the Subordinated Debt and
Series B Warrants in connection with the PIK Preferred Stock.
"Subordinated Debt" shall mean Indebtedness of any Company that is
-----------------
subordinated to any other Indebtedness of such Company.
"Subordinated Financing" shall mean the financing pursuant to the
----------------------
Subordinated Notes and the Subordinated Notes Documents.
<PAGE>
-25-
"Subordinated Lender" shall mean SBAF and any other Person who holds a
-------------------
legal or beneficial interest in the Subordinated Debt.
"Subordinated Notes" shall mean the 12.5% unsecured subordinated notes
------------------
in an aggregate principal amount of $37.0 million issued pursuant to the
Subordinated Note Documents and arranged by Liberty.
"Subordinated Note Documents" shall mean the Subordinated Loan
---------------------------
Agreement dated October 30, 1998 pursuant to which the Subordinated Notes were
issued and all guarantees and other documents relating thereto, including, but
not limited to, the Stock and Warrant Purchase Agreement, the Series A Warrants
and the Subordination Agreement as any such agreement or document may be amended
or replaced and in effect from time to time in accordance with its terms and
this Agreement.
"Subordination Agreement" shall mean the agreement among SBAF,
-----------------------
Borrower and the Administrative Agent dated October 30, 1998 whereby SBAF, as
Subordinated Lender agrees to the terms and conditions provided in such
agreement in favor of the Lenders.
"Subsidiary" shall mean, with respect to any Person, any corporation,
----------
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person. Unless the context clearly requires otherwise, all references to
any Subsidiary shall mean a Subsidiary of Borrower.
"Subsidiary Guarantee" shall mean the Guarantee of each Subsidiary
--------------------
Guarantor.
"Subsidiary Guarantors" shall mean each of the direct and indirect
---------------------
Domestic Subsidiaries of Borrower listed on Schedule 1.01(a) and each other
----------------
direct and indirect Domestic Subsidiary that guarantees the payment of the
Obligations of Borrower hereunder pursuant to Section 9.22 and the other Credit
Documents.
"Supermajority Lenders" shall mean (i) at any time prior to the
---------------------
Closing Date, Lenders holding at least two-thirds of the aggregate amount of the
Commitments and (ii) at any time after the Closing Date, Lenders holding at
least two-thirds of the sum of (without duplication) (a) the aggregate principal
amount of outstanding Loans (other than Swing Loans), plus (b) the aggregate
----
amount of all Letter of Credit Liabilities, plus (c) the aggregate Unutilized
----
Revolving Credit Commitments then in effect, plus (d) the aggregate Unutilized
----
Term Loan Commitments, plus (e) in the case of the Swing Loan Lender only, the
----
aggregate amount of Swing Loans then outstanding.
"Supermajority Lenders of the Affected Class" shall mean (i) at any
-------------------------------------------
time prior to the Closing Date, Lenders holding at least two-thirds of the
aggregate amount of the Commitments of the applicable tranche of Term Loan
Commitments which would be affected by any modification, supplement or waiver
contemplated by clause (V) or (VI) to the proviso to Section 12.04(a); and (ii)
at any time after the Closing Date, Lenders holding at least two-thirds of the
sum of the aggregate principal amount of outstanding Loans plus the aggregate
Unutilized Term Loan Commitments of the applicable tranche of Term Loans which
would be affected by any modification or waiver contemplated by clause (V) or
(VI) to the proviso to Section 12.04(a).
<PAGE>
-26-
"Surety Instruments" shall mean all letters of credit (including
------------------
standby and commercial), bankers' acceptances, bank guarantees, surety bonds and
similar instruments.
"Survey" shall mean a survey of any Mortgaged Real Property (and all
------
improvements thereon): (i) prepared by a surveyor or engineer licensed to
perform surveys in the state, province or country where such Mortgaged Real
Property is located, (ii) dated (or redated) not earlier than six months prior
to the date of delivery thereof unless there shall have occurred after the date
of such survey any exterior construction on the site of such Mortgaged Real
Property, in which event such survey shall be dated (or redated) after the
completion of such construction or, if such construction shall not have been
completed as of such date of delivery, not earlier than 20 days prior to such
date of delivery, (iii) certified by the surveyor (in a manner acceptable to
Administrative Agent) to Administrative Agent and the Title Company and (iv)
complying in all respects with the minimum detail requirements of the American
Land Title Association as such requirements are in effect on the date of
preparation of such survey.
"Swap Contract" shall mean any agreement entered into in the ordinary
-------------
course of business (as a bona fide hedge and not for speculative purposes)
---- ----
(including any master agreement and any agreement, whether or not in writing,
relating to any single transaction) that is an interest rate swap agreement,
basis swap, forward rate agreement, commodity swap, commodity option, equity or
equity index swap or option, bond option, interest rate option, foreign exchange
agreement, rate cap, collar or floor agreement, currency swap agreement, cross-
currency rate swap agreement, swaption, currency option or any other similar
agreement (including any option to enter into any of the foregoing) and is
designed to protect the Obligors against fluctuations in interest rates,
currency exchange rates, or similar risks.
"Swing Loan Commitment" shall mean the obligation of NationsBank, N.A.
---------------------
to make or continue Swing Loans hereunder in an aggregate principal amount up to
but not exceeding the amount set forth opposite NationsBank, N.A.'s name on
Annex A under the heading "Swing Loan Commitment," as the same may be reduced or
- -------
terminated pursuant to Section 2.04 or Section 10, it being understood that the
Swing Loan Commitment is part of the Revolving Credit Commitment of the Swing
Loan Lender, rather than a separate, independent commitment. As of the Closing
Date, the Swing Loan Commitment is $3.0 million.
"Swing Loan Lender" shall mean NationsBank, N.A. and its successors
-----------------
and assigns in such capacity.
"Swing Loan Maturity Date" shall mean the Revolving Credit Commitment
------------------------
Termination Date.
"Swing Loan Note" shall mean the promissory note made by Borrower
---------------
evidencing the Swing Loans, in the form of Exhibit A-4.
-----------
"Swing Loans" see Section 2.01(e).
-----------
"Taking" shall mean any taking of any Mortgaged Real Property or Real
------
Property of any Obligor or any of its Subsidiaries or any part thereof, in or by
condemnation or other eminent domain proceedings pursuant to any law, general or
special, or by reason of the temporary requisition of the use or occupancy of
any Mortgaged Real Property or Real Property of any Obligor or any of its
Subsidiaries or any part thereof, by any Governmental Authority, civil or
military. Taking shall not include any Casualty Event.
"Tax Benefit" see Section 5.06(a).
-----------
<PAGE>
-27-
"Term Loan Commitments" shall mean the Tranche A Term Loan Commitment
---------------------
and the Tranche B Term Loan Commitment, collectively.
"Term Loan A Facility" shall mean the credit facility comprising the
--------------------
Tranche A Term Loan Commitments.
"Term Loan B Facility" shall mean the credit facility comprising the
--------------------
Tranche B Term Loan Commitments.
"Term Loan Facility" shall mean the credit facility comprising the
------------------
Term Loan A Facility and the Term Loan B Facility.
"Term Loan Lenders" shall mean the Tranche A Term Loan Lenders and the
-----------------
Tranche B Term Loan Lenders, collectively.
"Term Loan Notes" shall mean the Tranche A Term Notes and the Tranche
---------------
B Term Notes, collectively.
"Term Loan Tranches" shall mean the Term Loans outstanding under the
------------------
Tranche A Term Loans and the Tranche B Term Loans, collectively, and "Term Loan
---------
Tranche" shall mean any one of them.
- -------
"Term Loans" shall mean the Tranche A Term Loans and the Tranche B
----------
Term Loans, collectively.
"Title Company" shall mean First American Title Insurance Company or
-------------
such other title insurance or abstract company as shall be designated by
Administrative Agent.
"Total Debt" shall mean at any date, the aggregate amount of
----------
Indebtedness of Borrower and the Subsidiaries as of such date determined on a
consolidated basis in accordance with GAAP.
"Tranche A Term Loan Commitment" shall mean, for each Tranche A Term
------------------------------
Loan Lender, the obligation of such Lender to make a Tranche A Term Loan in an
amount up to but not exceeding the amount set opposite the name of such Lender
on Annex A under the caption "Tranche A Term Loan Commitment" (as the same may
-------
be changed pursuant to Section 12.06(b)). The initial aggregate principal
amount of the Tranche A Term Loan Commitments is $35.0 million.
"Tranche A Term Loan Commitments" shall mean the aggregate sum of the
-------------------------------
Tranche A Term Loan Commitment of all the Lenders.
"Tranche A Term Loan Lenders" shall mean (a) on the date hereof, the
---------------------------
Lenders having Tranche A Term Loan Commitments on the signature pages hereof,
and (b) thereafter, the Lenders from time to time holding Tranche A Term Loans
and Tranche A Term Loan Commitments after giving effect to any assignments
thereof permitted by Section 12.06(b).
"Tranche A Term Loan Notes" shall mean the promissory notes provided
-------------------------
for by Section 2.08(b)(i) and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time.
<PAGE>
-28-
"Tranche A Term Loans" shall mean the loans provided for by Section
--------------------
2.01(b), which may be ABR Loans and/or LIBOR Loans.
"Tranche B Term Loan Commitment" shall mean, for each Tranche B Term
------------------------------
Loan Lender, the obligation of such Lender to make a Tranche B Term Loan in an
amount up to but not exceeding the amount set opposite the name of such Lender
on Annex A under the caption "Tranche B Term Loan Commitment" (as the same may
-------
be changed pursuant to Section 12.06(b)). The initial aggregate principal
amount of the Tranche B Term Loan Commitments is $40.0 million.
"Tranche B Term Loan Commitments" shall mean the aggregate sum of the
-------------------------------
Tranche B Term Loan Commitment of all the Lenders.
"Tranche B Term Loan Lenders" shall mean (a) on the date hereof, the
---------------------------
Lenders having Tranche B Term Loan Commitments on the signature pages hereof,
and (b) thereafter, the Lenders from time to time holding Tranche B Term Loans
and Tranche B Term Loan Commitments after giving effect to any assignments
thereof permitted by Section 12.06(b).
"Tranche B Term Loan Notes" shall mean the promissory notes provided
-------------------------
for by Section 2.08(b)(ii) and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time.
"Tranche B Term Loans" shall mean the loans provided for by Section
--------------------
2.01(c), which may be ABR Loans and/or LIBOR Loans.
"Transactions" shall mean the Recapitalization, the Merger, the
------------
Subordinated Financing, the Preferred Stock Financing, the Common Stock
Financing, the Buyout Group Financing, the Existing Credit Facility Repayment
and the borrowings hereunder on the Closing Date.
"Transaction Documents" shall mean any operative document relating to
---------------------
the Transactions, including but not limited to the Credit Documents and the
Recapitalization Documents and each of the Related Documents with respect
thereto, in each case, including all schedules, exhibits, appendices, annexes
and attachments and amendments thereto and, in each case, as amended and in
effect from time to time in accordance with their respective terms and this
Agreement.
"Type" see Section 1.03.
----
"UCC" shall mean the Uniform Commercial Code as in effect in the
---
applicable state of jurisdiction.
"Unfunded Liabilities" shall mean, with respect to any Plan at any
--------------------
time, the amount (if any) by which (i) the value of all benefit liabilities
under such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such liabilities under Title I
of ERISA (excluding any accrued but unpaid contributions), all determined as of
the then most recent valuation date for such Plan.
"Unutilized Revolving Credit Commitment" shall mean, for any Revolving
--------------------------------------
Credit Lender, at any time, the excess of such Lender's Revolving Credit
Commitment at such time over the sum of (i) the aggregate outstanding principal
amount of Revolving Credit Loans made by such Lender, (ii) such Lender's
Revolv-
<PAGE>
-29-
ing Credit Commitment Percentage of the aggregate amount of Letter of Credit
Liabilities at such time, and (iii) with respect to the Swing Loan Lender only,
the aggregate principal amount of Swing Loans then outstanding.
"Unutilized Term Loan Commitments" shall mean, for any Term Loan
--------------------------------
Lender, at any time, the excess of such Lender's Term Loan Commitments over the
aggregate principal amount of such Lender's outstanding Term Loans.
"U.S. Person" shall mean citizens or residents of the United States,
-----------
partnerships or corporations created in or under the laws of the United States
or any political subdivision thereof or therein, estates the income of which is
subject to U.S. federal income taxation regardless of its source, and any trust
if (i) a U.S. court can exercise primary supervision over the administration of
such trust and (ii) one or more U.S. fiduciaries have the authority to control
all of the substantial decisions of such trust.
"Wholly Owned Subsidiary" shall mean, with respect to any Person, any
-----------------------
corporation, partnership or other entity of which all of the equity securities
or other ownership interests (other than, in the case of a corporation,
directors' qualifying shares) are directly or indirectly owned or controlled by
such Person or one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person. Unless the
context clearly requires otherwise, all references to any Wholly Owned
Subsidiary shall mean a Wholly Owned Subsidiary of Borrower
"Working Capital" shall mean an amount determined for Borrower and the
---------------
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP) equal to the sum of all current assets (other than cash)
less the sum of all current liabilities (other than the current portion of long-
term Indebtedness).
1.02. Accounting Terms and Determinations. Except as otherwise
-----------------------------------
provided in this Agreement, all computations and determinations as to accounting
or financial matters shall be made in accordance with GAAP, and all accounting
or financial terms shall have the meanings ascribed to such terms by GAAP as in
effect on the date hereof. All financial statements to be delivered pursuant to
this Agreement shall be prepared in accordance with GAAP. All financial
covenants are to be calculated in accordance with GAAP as in effect on the date
hereof unless such modifications are agreed to by the parties hereto.
Notwithstanding the foregoing, if any changes in accounting principles
from those used in the preparation of the financial statements referred to in
Section 8.02 hereafter occasioned by the promulgation of rules, regulations,
pronouncements or opinions by or required by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions) result in a change in the method of
calculation of financial covenants, standards or terms found in Sections 1, 8
and 9 hereof, the parties hereto agree to enter into negotiations in order to
amend such provisions so as to equitably reflect such changes with the desired
result that the criteria for evaluating Borrower's financial condition shall be
the same after such changes as if such changes had not been made.
1.03. Classes and Types of Loans. Loans hereunder are distinguished
--------------------------
by "Class" and by "Type". The "Class" of a Loan (or of a Commitment to make a
-----
Loan) refers to whether such Loan is a Revolving Credit Loan, Swing Loan,
Tranche A Term Loan or Tranche B Term Loan, each of which constitutes a Class.
The "Type" of a Loan refers to whether such Loan is an Alternate Base Rate Loan
----
or a LIBOR Loan, each of which constitutes a Type. Loans may be identified by
both Class and Type.
<PAGE>
-30-
1.04. Rules of Construction. (a) In this Agreement and each other
---------------------
Credit Document, unless the context clearly requires otherwise (or such other
Credit Document clearly provides otherwise), references to (i) the plural
include the singular, the singular the plural and the part the whole; (ii)
Persons include their respective permitted successors and assigns or, in the
case of governmental Persons, Persons succeeding to the relevant functions of
such Persons; (iii) agreements (including this Agreement), promissory notes and
other contractual instruments include subsequent amendments, assignments, and
other modifications thereto, but only to the extent such amendments, assignments
or other modifications thereto are not prohibited by their terms or the terms of
any Credit Document; (iv) statutes and related regulations include any
amendments of same and any successor statutes and regulations; and (v) time
shall be a reference to New York City time. Where any provision herein refers
to action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person.
(b) In this Agreement and each other Credit Document, unless the
context clearly requires otherwise (or such other Credit Document clearly
provides otherwise), (i) "amend" shall mean "amend, amend and restate,
-----
supplement or modify"; and "amended" and "amendment" shall have meanings
------- ---------
correlative to the foregoing; (ii) in the computation of periods of time from a
specified date to a later specified date, "from" shall mean "from and
----
including"; "to" and "until" shall mean "to but excluding"; and "through" shall
-- ----- -------
mean "to and including"; (iii) "hereof," "herein" and "hereunder" (and similar
------ ------ ---------
terms) in this Agreement or any other Credit Document refer to this Agreement or
such other Credit Document, as the case may be, as a whole and not to any
particular provision of this Agreement or such other Credit Document; (iv)
"including" (and similar terms) shall mean "including without limitation" (and
- ----------
similarly for similar terms); (v) "or" has the inclusive meaning represented by
--
the phrase "and/or"; (vi) "satisfactory to" any Creditor shall mean in form,
---------------
scope and substance and on terms and conditions satisfactory to such Creditor;
(vii) references to "the date hereof" shall mean the date first set forth above;
---------------
and (viii) "asset" and "Property" shall have the same meaning and effect and
----- --------
refer to all tangible and intangible assets and property, whether real, personal
or mixed and of every type and description.
(c) In this Agreement unless the context clearly requires otherwise,
any reference to (i) an Annex, Exhibit or Schedule is to an Annex, Exhibit or
Schedule, as the case may be, attached to this Agreement and constituting a part
hereof, and (ii) a Section or other subdivision is to a Section or such other
subdivision of this Agreement.
Section 2. Commitments, Loans, Notes, Prepayments.
--------------------------------------
2.01. Loans.
-----
(a) Revolving Credit Loans. Each Revolving Credit Lender severally
----------------------
agrees, on the terms and conditions of this Agreement, to make revolving credit
loans (the "Revolving Credit Loans") to Borrower in Dollars during the period
----------------------
from and including the date hereof to but not including the Revolving Credit
Commitment Termination Date in an aggregate principal amount at any one time
outstanding not exceeding the amount of the Revolving Credit Commitment of such
Lender as in effect from time to time; provided, however, that in no event shall
-------- -------
the sum of the aggregate principal amount of (without duplication) all Revolving
Credit Loans then outstanding, plus the aggregate principal amount of Swing
----
Loans then outstanding, plus the aggregate amount of all Letter of Credit
----
Liabilities at any time exceed the aggregate amount of the Revolving Credit
Commitments as in effect at such time. Subject to the terms and conditions of
this Agreement, during such period Borrower may borrow, repay and reborrow the
amount of the Revolving Credit Commitments by means of Alternate Base Rate Loans
and LIBOR Loans and may Convert Revolving Credit Loans of one Type into
Revolving Credit Loans of another Type (as provided in Section 2.09) or Continue
Revolving Credit Loans of one Type as Revolving Credit Loans of the same Type
(as provided in Section 2.09).
<PAGE>
-31-
(b) Tranche A Term Loans. Each Tranche A Term Loan Lender severally
--------------------
agrees, on the terms and conditions of this Agreement, to make a single term
loan to Borrower in Dollars on the Closing Date in a principal amount equal to
the Tranche A Term Loan Commitment of such Lender, such loan to be used to
finance, in part, the Recapitalization and the Existing Credit Facility
Repayment (including related fees and expenses). Subject to the terms and
conditions of this Agreement, thereafter Borrower may Convert Tranche A Term
Loans of one Type into Tranche A Term Loans of another Type (as provided in
Section 2.09) or Continue Term Loans of one Type as Tranche A Term Loans of the
same Type (as provided in Section 2.09).
Tranche A Term Loans that are repaid or prepaid may not be reborrowed.
(c) Tranche B Term Loans. Each Tranche B Term Loan Lender severally
--------------------
agrees, on the terms and conditions of this Agreement, to make a single term
loan to Borrower in Dollars on the Closing Date in a principal amount equal to
the Tranche B Term Loan Commitment of such Lender, such loan to be used to
finance, in part, the Recapitalization and the Existing Credit Facility
Repayment (including related fees and expenses). Subject to the terms and
conditions of this Agreement, thereafter Borrower may Convert Tranche B Term
Loans of one Type into Tranche B Term Loans of another Type (as provided in
Section 2.09) or Continue Tranche B Term Loans of one Type as Tranche B Term
Loans of the same Type (as provided in Section 2.09).
Tranche B Term Loans that are repaid or prepaid may not be reborrowed.
(d) Limit on LIBOR Loans. No more than ten separate Interest Periods
--------------------
in respect of LIBOR Loans of any Class may be outstanding at any one time. No
LIBOR Loans may be made prior to the earlier of (x) such time as Syndication
Agent has notified Borrower that the primary syndication of the credit
commitments and loans hereunder has been completed and (y) one week after the
Closing Date. No LIBOR Loans may be made on the Closing Date unless consented
to by Syndication Agent.
(e) Swing Loans. Subject to the terms and conditions of this
-----------
Agreement, upon request of Borrower, the Swing Loan Lender agrees to make one or
more swing loans to Borrower from time to time from and including the Closing
Date, to but excluding the Swing Loan Maturity Date, up to but not exceeding the
amount of the Swing Loan Lender's Swing Loan Commitment as then in effect (such
swing loans referred to in this Section 2.01(e) now or hereafter made by the
Swing Loan Lender to Borrower from and including and after the Closing Date are
hereinafter collectively called the "Swing Loans"). Prior to the Swing Loan
-----------
Maturity Date, Borrower may borrow, repay and reborrow Swing Loans up to the
Swing Loan Commitment in accordance with the terms of this Agreement. The Swing
Loan Lender shall not make any Swing Loans on or after the Swing Loan Maturity
Date. Notwithstanding anything to the contrary contained in this Section
2.01(e) or elsewhere in this Agreement, the Swing Loan Lender shall not be
obligated, pursuant to this Section 2.01(e) or otherwise, to make any Swing Loan
to or for the account of Borrower, and Borrower shall not be entitled to borrow,
pursuant to this Section 2.01(e), if, after giving full effect to the requested
Swing Loan, the aggregate outstanding amount of Revolving Credit Loans, plus the
----
aggregate outstanding amount of Swing Loans, plus the aggregate outstanding
----
Letter of Credit Liabilities would exceed the aggregate amount of the Revolving
Credit Commitments as in effect at such time. Notwithstanding anything herein
or elsewhere to the contrary, the Swing Loans will be made and maintained only
as Alternate Base Rate Loans. The Swing Loan Lender shall not make any Swing
Loan after receiving a written notice from Borrower, Administrative Agent or the
Majority Lenders stating that a Default or an Event of Default exists and is
continuing until such time as the Swing Loan Lender shall have received written
notice of (i) rescission of all such notices from the party or parties
originally delivering such notice, (ii) the waiver of such Default or Event of
Default by the Majority Lenders, or (iii) Administrative Agent's good faith
determination that such Default or Event of Default has ceased to exist. Swing
Loans shall be made in minimum amounts of $100,000 and integral multiples of
$100,000 above such amount.
<PAGE>
-32-
Upon the occurrence of a Default, each Revolving Credit Lender shall
be deemed to have purchased (and each Revolving Credit Lender hereby irrevocably
agrees to purchase on a pro rata basis (based upon each Revolving Credit
--- ----
Lender's Revolving Credit Commitment)) an irrevocable risk participation in all
outstanding Swing Loans, together with all accrued interest thereon, without any
further action by or on behalf of the Swing Loan Lender, any other Lender,
Borrower or any other Person. Upon one Business Day's notice from the Swing
Loan Lender, each other Revolving Credit Lender shall deliver to the Swing Loan
Lender an amount equal to its respective participation in such Swing Loan (as
determined pursuant to the immediately preceding sentence) in cash. In order to
evidence such participation, each Revolving Credit Lender agrees to enter into a
participation agreement at the request of the Swing Loan Lender in form and
substance satisfactory to the Swing Loan Lender. If any Revolving Credit Lender
fails to make available to the Swing Loan Lender the amount of such Revolving
Credit Lender's participation as provided in this paragraph, the Swing Loan
Lender shall be entitled to recover such amount on demand from such Revolving
Credit Lender, together with interest thereon at the Federal Funds Rate until
such amount is paid in full in cash. In the event the Swing Loan Lender
receives a payment from Borrower or any other Obligor of any amount in which the
Revolving Credit Lenders have purchased participations as provided in this
paragraph, the Swing Loan Lender shall distribute (after first applying any such
payment to any fees, costs and expenses of the Revolving Credit Lenders) to each
Revolving Credit Lender its pro rata share of such payment. Anything contained
--- ----
in this Agreement or otherwise to the contrary notwithstanding, (A) each
Revolving Credit Lender's obligation to purchase a participation in each unpaid
Swing Loan shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, (1) any setoff, counterclaim,
recoupment, defense or other right which such Revolving Credit Lender may now or
hereafter have against the Swing Loan Lender, Borrower or any other Person for
any reason whatsoever, (2) the occurrence or continuation of a Default or an
Event of Default, (3) any material adverse change in the condition of Borrower
or any Subsidiary, (4) any breach or default of this Agreement or any of the
Security Documents by any Person, or (5) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing, and (B) the
Swing Loan Lender shall not have any obligation to make any Swing Loans if
Borrower fails for whatever reason to satisfy any of the conditions precedent
set forth in Section 7.03.
2.02. Borrowings. (a) Borrower shall give Administrative Agent
----------
notice of each borrowing hereunder as provided in Section 4.05. The form of
such notice of borrowing shall be substantially in the form of Exhibit I. Not
---------
later than 1:00 p.m. New York time on the date specified for each borrowing
hereunder, each Lender shall make available the amount of the Loan or Loans to
be made by it on such date to Administrative Agent, at an account specified by
Administrative Agent maintained at the Principal Office, in immediately
available funds, for account of Borrower.
(b) Each borrowing of Revolving Credit Loans shall be made by each
Revolving Credit Lender pro rata based on such Lender's Revolving Credit
--- ----
Commitment Percentage. The amounts so received by Administrative Agent shall,
subject to the terms and conditions of this Agreement, be made available to
Borrower by depositing the same, in immediately available funds, in an account
of Borrower maintained with Administrative Agent at the Principal Office.
2.03. Letters of Credit. Subject to the terms and conditions hereof,
-----------------
the Revolving Credit Commitments may be utilized, upon the request of Borrower,
in addition to the Revolving Credit Loans provided for by Section 2.01(a), for
standby and commercial documentation letters of credit (herein collectively
called "Letters of Credit") issued by the Issuing Lender for the account of
-----------------
Borrower; provided, however, that in no event shall (i) the aggregate amount of
-------- -------
all Letter of Credit Liabilities, plus the aggregate principal amount of the
----
Revolving Credit Loans then outstanding, plus the aggregate principal amount of
----
Swing Loans then outstanding exceed at any time the Revolving Credit Commitments
as in effect at such time, (ii) the sum of the ag-
<PAGE>
-33-
gregate principal amount of Revolving Credit Loans then outstanding made by any
Revolving Credit Lender, plus such lender's pro rata share (based on the
---- --- ----
Revolving Credit Commitments) of the aggregate principal amount of Swing Loans
then outstanding, plus such Lender's pro rata share (based on the Revolving
---- --- ----
Credit Commitments) of the aggregate amount of all Letter of Credit Liabilities
exceed such Lender's Revolving Credit Commitment as in effect at such time,
(iii) the outstanding aggregate amount of all Letter of Credit Liabilities
exceed $7.5 million, (iv) the expiration date of any Letter of Credit extend
beyond the earlier of (x) the fifth Business Day preceding the Revolving Credit
Commitment Termination Date and (y) the date twelve months following the date of
such issuance for standby Letters of Credit or 180 days after the date of such
issuance for commercial Letters of Credit, unless the Majority Revolving Credit
Lenders have approved such expiry date in writing; provided, however, that any
-------- -------
standby Letter of Credit may be automatically extendible for periods of up to
one year (but never beyond the fifth Business Day preceding the Revolving Credit
Commitment Termination Date) so long as such Letter of Credit provides that the
Issuing Lender retains an option satisfactory to the Issuing Lender, to
terminate such Letter of Credit prior to each extension date, unless all of the
Revolving Credit Lenders have approved such expiry date in writing, or (v) the
Issuing Lender issue any Letter of Credit after it has received notice from
Borrower or the Majority Revolving Credit Lenders stating that a Default or
Event of Default exists until such time as the Issuing Lender shall have
received written notice of (x) rescission of such notice from the Majority
Revolving Credit Lenders, (y) waiver of such Default or Event of Default in
accordance with this Agreement or (z) Administrative Agent's good faith
determination that such Default or Event of Default has ceased to exist. The
following additional provisions shall apply to Letters of Credit:
(a) Borrower shall give Administrative Agent at least three Business
Days' irrevocable prior notice (effective upon receipt) specifying the date
(which shall be no later than thirty days preceding the Revolving Credit
Termination Date) each Letter of Credit is to be issued and describing in
reasonable detail the proposed terms of such Letter of Credit (including
the beneficiary thereof) (including whether such Letter of Credit is to be
a commercial Letter of Credit or a standby Letter of Credit). Upon receipt
of any such notice, Administrative Agent shall advise the Issuing Lender of
the contents thereof.
(b) On each day during the period commencing with the issuance by the
Issuing Lender of any Letter of Credit and until such Letter of Credit
shall have expired or been terminated, the Revolving Credit Commitment of
each Revolving Credit Lender shall be deemed to be utilized for all
purposes hereof in an amount equal to such Lender's Revolving Credit
Commitment Percentage of the then undrawn face amount of such Letter of
Credit. Each Revolving Credit Lender (other than the Issuing Lender) agrees
that, upon the issuance of any Letter of Credit hereunder, it shall
automatically acquire a participation in the Issuing Lender's liability
under such Letter of Credit in an amount equal to such Lender's Revolving
Credit Commitment Percentage of such liability, and each Revolving Credit
Lender (other than the Issuing Lender) thereby shall absolutely,
unconditionally and irrevocably assume, as primary obligor and not as
surety, and shall be unconditionally obligated to the Issuing Lender to pay
and discharge when due, its Revolving Credit Commitment Percentage of the
Issuing Lender's liability under such Letter of Credit. The Issuing Lender
shall be deemed to hold a Letter of Credit Liability in an amount equal to
its retained interest in the related Letter of Credit after giving effect
to such acquisition by the Revolving Credit Lenders other than the Issuing
Lender of their participation interests.
(c) Upon receipt from the beneficiary of any Letter of Credit of any
demand for payment under such Letter of Credit, the Issuing Lender shall
promptly notify Borrower (through Administrative Agent) of the amount to be
paid by the Issuing Lender as a result of such demand and the date on which
payment is to be made by the Issuing Lender to such beneficiary in respect
of such demand. Borrower hereby unconditionally agrees to pay and reimburse
the Issuing Lender for the amount of each demand
<PAGE>
-34-
for payment under such Letter of Credit not later than the date on which
the Issuing Lender notifies Borrower that payment is to be made by the
Issuing Lender to the beneficiary thereunder (or the next Business Day if
such notice is received after 11:00 a.m. New York time).
(d) Forthwith upon its receipt of a notice referred to in clause (c)
of this Section 2.03, Borrower shall advise the Issuing Lender whether or
not Borrower intends to borrow hereunder to finance its obligation to
reimburse the Issuing Lender for the amount of the related demand for
payment and, if it does, submit a notice of such borrowing as provided in
Section 4.05. In the event that Borrower fails to so advise Administrative
Agent, or if Borrower fails to reimburse the Issuing Lender for a demand
for payment under a Letter of Credit by the date of notice of such payment
(or the next Business Day if received after 1:00 p.m. New York time on such
date), Administrative Agent shall give each Revolving Credit Lender prompt
notice of the amount of the demand for payment, specifying such Lender's
Revolving Credit Commitment Percentage of the amount of the related demand
for payment.
(e) Each Revolving Credit Lender (other than the Issuing Lender)
shall pay to Administrative Agent for account of the Issuing Lender at the
Principal Office in Dollars and in immediately available funds, the amount
of such Lender's Revolving Credit Commitment Percentage of any payment
under a Letter of Credit upon notice by the Issuing Lender (through
Administrative Agent) to such Revolving Credit Lender requesting such
payment and specifying such amount. Each such Revolving Credit Lender's
obligation to make such payments to Administrative Agent for account of the
Issuing Lender under this clause (e), and the Issuing Lender's right to
receive the same, shall be absolute and unconditional and shall not be
affected by any circumstance whatsoever, including (i) the failure of any
other Revolving Credit Lender to make its payment under this clause (e),
(ii) the financial condition of Borrower or the existence of any Default or
(iii) the termination of the Commitments. Each such payment to the Issuing
Lender shall be made without any offset, abatement, withholding or
reduction whatsoever. Nothing in this clause (e) shall be deemed to
prejudice the right of any Revolving Credit Lender to recover from the
Issuing Lender in the event of a wrongful payment of the kind described in
the proviso of the last paragraph of this Section 2.03.
(f) Upon the making of each payment by a Revolving Credit Lender to
the Issuing Lender pursuant to clause (e) above in respect of any Letter of
Credit, such Lender shall, automatically and without any further action on
the part of Administrative Agent, the Issuing Lender or such Lender,
acquire (i) a participation in an amount equal to such payment in the
Reimbursement Obligation owing to the Issuing Lender by Borrower hereunder
and under the Letter of Credit Documents relating to such Letter of Credit
and (ii) a participation in a percentage equal to such Lender's Revolving
Credit Commitment Percentage in any interest or other amounts payable by
Borrower hereunder and under such Letter of Credit Documents in respect of
such Reimbursement Obligation. Upon receipt by the Issuing Lender from or
for the account of Borrower of any payment in respect of any Reimbursement
Obligation or any such interest or other amounts (including by way of
setoff or application of proceeds of any collateral security) the Issuing
Lender shall promptly pay to Administrative Agent for account of each
Revolving Credit Lender entitled thereto, such Revolving Credit Lender's
Revolving Credit Commitment Percentage of such payment, each such payment
by the Issuing Lender to be made in the same money and funds in which
received by the Issuing Lender. In the event any payment received by the
Issuing Lender and so paid to the Revolving Credit Lenders hereunder is
rescinded or must otherwise be returned by the Issuing Lender, each
Revolving Credit Lender shall, upon the request of the Issuing Lender
(through Administrative Agent), repay to the Issuing Lender (through
Administrative Agent) the amount of such payment paid to such Lender, with
interest at the rate specified in clause (i) of this Section 2.03.
<PAGE>
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(g) Borrower shall pay to Administrative Agent for the account of the
Issuing Lender in respect of each Letter of Credit a letter of credit
commission in an amount equal to (x) the rate per annum equal to the
--- -----
Applicable Margin for Revolving Credit Loans that would be LIBOR Loans in
effect at the time of issuance thereof, multiplied by (y) the daily average
undrawn face amount of such Letter of Credit (but in no event less than
$300 per Letter of Credit on a per annum basis) for the period from and
--- -----
including the date of issuance of such Letter of Credit (i) in the case of
a Letter of Credit which expires in accordance with its terms, to and
including such expiration date and (ii) in the case of a Letter of Credit
which is drawn in full or is otherwise terminated other than on the stated
expiration date of such Letter of Credit, to but excluding the date such
Letter of Credit is drawn in full or is terminated, such fee to be non-
refundable and to be paid in arrears quarterly, on each Quarterly Date (or
such minimum $300 per annum fee to be paid on the date of issuance of the
--- -----
applicable Letter of Credit), and on the earlier of the Revolving Credit
Commitment Termination Date or the date of the termination of the Revolving
Credit Commitments or the date of such termination, expiration or the
Business Day subsequent to notice of a drawing. The Issuing Lender shall
pay to Administrative Agent for account of each Revolving Credit Lender
(other than the Issuing Lender), from time to time at reasonable intervals
(but in any event at least quarterly), but only to the extent actually
received from Borrower, an amount equal to such Lender's Revolving Credit
Commitment Percentage of all letter of credit commissions referred to in
the first sentence of this clause (g). In addition, Borrower shall pay to
Administrative Agent for account of the Issuing Lender only in respect of
each Letter of Credit a letter of credit issuance fee in an amount equal to
1/4% per annum multiplied by the original face amount from the issue date
--- -----
through the expiry date of such Letter of Credit (but in no event less than
$300 per Letter of Credit), such amount to be payable on the date of
issuance of such Letter of Credit, plus all reasonable charges, costs and
expenses in the amounts customarily charged by the Issuing Lender from time
to time in like circumstances with respect to the issuance of each Letter
of Credit and drawings and other transactions relating thereto.
(h) Promptly following the end of each calendar month, the Issuing
Lender shall deliver (through Administrative Agent) to each Revolving
Credit Lender and Borrower a notice describing the aggregate amount of all
Letters of Credit outstanding at the end of such month. Upon the request of
any Revolving Credit Lender from time to time, the Issuing Lender shall
deliver any other information reasonably requested by such Lender with
respect to each Letter of Credit then outstanding.
(i) To the extent that any Revolving Credit Lender fails to pay an
amount required to be paid pursuant to clause (e) or (f) of this Section
2.03 on the due date therefor, such Lender shall pay interest to the
Issuing Lender (through Administrative Agent) on such amount from and
including such due date to but excluding the date such payment is made (i)
during the period from and including such due date to but excluding the
date three Business Days thereafter, at a rate per annum equal to the
--- -----
Federal Funds Rate (as in effect from time to time) and (ii) thereafter, at
a rate per annum equal to the Post-Default Rate (as in effect from time to
--- -----
time).
(j) The issuance by the Issuing Lender of any modification or
supplement to any Letter of Credit hereunder that would extend the expiry
date or increase the face amount thereof shall be subject to the same
conditions applicable under this Section 2.03 to the issuance of new
Letters of Credit, and no such modification or supplement shall be issued
hereunder unless either (x) the respective Letter of Credit affected
thereby would have complied with such conditions had it originally been
issued hereunder in such modified or supplemented form or (y) each
Revolving Credit Lender shall have consented thereto.
<PAGE>
-36-
(k) Notwithstanding the foregoing, the Issuing Lender shall not be
under any obligation to issue any Letter of Credit if at the time of such
issuance, any order, judgment or decree of any Governmental Authority or
arbitrator shall purport by its terms to enjoin or restrain the Issuing
Lender from issuing such Letter of Credit or any requirement of law
applicable to the Issuing Lender or any request or directive (whether or
not having the force of law) from any Governmental Authority shall
prohibit, or request that the Issuing Lender refrain from, the issuance of
letters of credit generally or such Letter of Credit in particular or shall
impose upon such Issuing Lender with respect to such Letter of Credit any
restriction or reserve or capital requirement (for which the Issuing Lender
is not otherwise compensated) not in effect on the date hereof.
The obligations of Borrower under this Agreement and any Letter of Credit
Document to reimburse the Issuing Lender for a drawing under a Letter of Credit,
and to repay any drawing under a Letter of Credit converted into Revolving
Credit Loans, shall be unconditional and irrevocable, and shall be paid strictly
in accordance with the terms of this Agreement and each such other Letter of
Credit Document under all circumstances, including the following: (i) any lack
of validity or enforceability of this Agreement or any Letter of Credit
Document; (ii) the existence of any claim, setoff, defense or other right that
Borrower may have at any time against any beneficiary or any transferee of any
Letter of Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), the Issuing Lender or any other Person, whether in
connection with this Agreement, the transactions contemplated hereby or by the
Letter of Credit Documents or any unrelated transaction; (iii) any draft,
demand, certificate or other document presented under any Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect; or any loss or
delay in the transmission or otherwise of any document required in order to make
a drawing under any Letter of Credit; or any defense based upon the failure of
any drawing under a Letter of Credit to conform to the terms of the Letter of
Credit or any non-application or misapplication by the beneficiary of the
proceeds of such drawing; or (iv) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing, including any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, Borrower or a Subsidiary Guarantor; provided, however, that
-------- -------
Borrower shall not be obligated to reimburse the Issuing Lender for any wrongful
payment determined by a court of competent jurisdiction to have been made by the
Issuing Lender as a result of acts or omissions constituting willful misconduct
or gross negligence on the part of the Issuing Lender or which is not in
accordance with the standard of care specified in the Uniform Commercial Code of
the State of New York. To the extent that any provision of any Letter of Credit
Document is inconsistent with the provisions of this Section 2.03, the
provisions of this Section 2.03 shall control.
2.04. Termination and Reductions of Commitments. (a) The Commitments
-----------------------------------------
shall be automatically and permanently terminated on November 30, 1998 if the
Closing Date does not occur by said date. The aggregate amount of the Revolving
Credit Commitments shall be automatically and permanently reduced to zero on the
Revolving Credit Commitment Termination Date.
The aggregate amount of the Term Loan Commitments shall be
automatically and permanently reduced to zero on the Closing Date immediately
after the making of the Term Loans on the Closing Date.
(b) Borrower shall have the right, at any time or from time to time
(i) so long as no Revolving Credit Loans or Letter of Credit Liabilities will be
outstanding as of the date specified for termination, to terminate the Revolving
Credit Commitments, and (ii) to reduce the aggregate amount of the Unutilized
Revolving Credit Commitments of all the Revolving Credit Lenders; provided,
--------
however, that (x) Borrower shall give notice of each such termination or
- -------
reduction as provided in Section 4.05, and (y) each partial reduction shall be
in an aggregate amount at least equal to $1.0 million (or a larger multiple of
$100,000).
<PAGE>
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(c) The Commitments once terminated or reduced may not be
reinstated.
2.05. Fees. (a) Borrower shall pay to Administrative Agent for the
----
account of each Revolving Credit Lender a commitment fee on the daily average
amount of such Lender's Unutilized Revolving Credit Commitment, for the period
from and including the date of execution and delivery hereof to but not
including the earlier of the date such Revolving Credit Commitment is terminated
and the Revolving Credit Commitment Termination Date, at a rate per annum equal
--- -----
to the Applicable Revolving Facility Fee Percentage; provided, however, during
-------- -------
each 30-day annual cleandown period pursuant to Section 2.12, Borrower shall pay
a commitment fee on the daily average amount of such Lender's pro rata share of
the total Unutilized Revolving Credit Commitment in excess of $7.5 million, for
such 30-day period, at a rate per annum equal to one-half of the Applicable
--- -----
Revolving Facility Fee Percentage. Borrower shall pay to Administrative Agent
for the account of each Term Loan Lender a commitment fee on the amount of such
Lender's Unutilized Term Loan Commitments for the period from and including the
date of execution and delivery hereof to but not including the earlier of the
Closing Date and the date of termination or expiration of the Term Loan
Commitments at a rate per annum equal to 0.50%; provided, however, that no such
--- ----- -------- -------
fee shall be owed if the initial Loans are made on the date of execution and
delivery of the Agreement. Any accrued commitment fee under this Section
2.05(a)(i) shall be payable in arrears (x) with respect to the Revolving Credit
Commitments on each Quarterly Date and on the earlier of the date the Revolving
Credit Commitments are terminated and the Revolving Credit Commitment
Termination Date, and (y) with respect to the Term Loan Commitments on the
earlier of the Closing Date and the date of termination or expiration of the
Term Loan Commitments.
(b) Borrower shall pay to Administrative Agent for its own account a
nonrefundable administrative fee pursuant to the terms of Administrative Agent's
Fee Letter.
2.06. Lending Offices. The Loans of each Type made by each Lender
---------------
shall be made and maintained at such Lender's Applicable Lending Office for
Loans of such Type.
2.07. Several Obligations. The failure of any Lender to make any Loan
to be made by it on the date specified therefor shall not relieve any other
Lender of its obligation to make its Loan on such date, but neither any Lender
nor Administrative Agent shall be responsible for the failure of any other
Lender to make a Loan to be made by such other Lender, and (except as otherwise
provided in Section 4.06) no Lender shall have any obligation to Administrative
Agent or any other Lender for the failure by such Lender to make any Loan
required to be made by such Lender.
2.08. Notes; Register. (a) The Revolving Credit Loans made by each
---------------
Revolving Credit Lender who has requested a Note shall be evidenced by a single
promissory note of Borrower substantially in the form of Exhibit A-1, dated the
-----------
date hereof, payable to such Lender (or its nominee) and otherwise duly
completed.
(b)(i) The Tranche A Term Loans made by each Tranche A Term Loan
Lender who has requested a Note shall be evidenced by a single promissory note
of Borrower substantially in the form of Exhibit A-2, dated the date hereof,
-----------
payable to such Lender (or its nominee) and otherwise duly completed.
(ii) The Tranche B Term Loans made by each Tranche B Term Loan
Lender who has requested a Note shall be evidenced by a single promissory note
of Borrower substantially in the form of Exhibit A-3, dated the date hereof,
payable to such Lender (or its nominee) and otherwise duly completed.
<PAGE>
-38-
(iii) The Swing Loans made by the Swing Loan Lender shall be evidenced
by a single promissory note of Borrower substantially in the form of Exhibit
-------
A-4, dated the date hereof, payable to the Swing Loan Lender and otherwise duly
- ---
completed.
(c) The date, amount, Type, interest rate and duration of Interest
Period (if applicable) of each Loan of each Class made by each Lender to
Borrower, and each payment made on account of the principal thereof, shall be
recorded by such Lender on its books and, prior to any transfer of any Note
evidencing the Loans of such Class held by it, endorsed by such Lender on the
schedule attached to such Note or any continuation thereof; provided, however,
-------- -------
that the failure of such Lender to make any such recordation or endorsement
shall not affect the obligations of Borrower to make a payment when due of any
amount owing hereunder or under such Note.
(d) Borrower hereby designates Administrative Agent to serve as
Borrower's agent, solely for purposes of this Section 2.08, to maintain a
register (the "Register") on which it will record the Commitment from time to
--------
time of each of the Lenders, the Loans made by each of the Lenders and each
repayment in respect of the principal amount of the Loans of each Lender.
Failure to make any such recordation or any error in such recordation shall not
affect Borrower's obligations in respect of such Loans. The entries in the
Register shall be conclusive, in the absence of manifest error, and Borrower,
Administrative Agent and the Lenders shall treat each Person whose name is
recorded in the Register as the owner of a Loan or other obligation hereunder as
the owner thereof for all purposes of this Agreement and the other Credit
Documents, notwithstanding any notice to the contrary. The Register shall be
available for inspection by Borrower or any Lender at any reasonable time and
from time to time upon reasonable prior notice.
2.09. Optional Prepayments and Conversions or Continuations of Loans.
--------------------------------------------------------------
Subject to Section 4.04, Borrower shall have the right to prepay Loans, or to
Convert Loans of one Type into Loans of another Type or Continue Loans of one
Type as Loans of the same Type, at any time or from time to time to be applied
as specified by Borrower; provided, however, that: (a) Borrower shall give
-------- -------
Administrative Agent notice of each such prepayment, Conversion or Continuation
as provided in Section 4.05 (and, upon the date specified in any such notice of
prepayment, the amount to be prepaid shall become due and payable hereunder);
(b) if any LIBOR Loans are prepaid or Converted other than on the last day of an
Interest Period for such Loans, Borrower shall pay all amounts due under Section
5; and (c) prepayments of the Term Loans pursuant to this Section 2.09 shall be
applied pro rata among the Term Loan Tranches based upon the remaining unpaid
--- ----
amounts thereof and (A) as to Tranche A Term Loans, the amount to be applied
thereto shall be applied pro rata among the remaining Amortization Payments
--- ----
based upon the remaining unpaid amounts thereof and (B) as to the Tranche B Term
Loans, the amount to be applied thereto shall be applied in inverse order of
maturity of the remaining Amortization Payments thereunder. Each notice of
Conversion or Continuation shall be substantially in the form of Exhibit J.
---------
Notwithstanding the foregoing, in the event that Borrower elects (in
its sole discretion) to provide the option (the "Option") to any of the holders
------
of Tranche B Term Loans to elect (in the absolute and sole discretion of such
holders) not to have all or any part of any voluntary prepayments applied to
such Lender's Tranche B Term Loans, Borrower shall provide written notice of the
Option with respect to such voluntary prepayment at least five Business Days
prior to such voluntary prepayment to Administrative Agent and all holders of
Tranche B Term Loans. Any such holder may elect to accept such Option (in whole
or in part) on or prior to the Business Day prior to the date of such
prepayment. Any such holder who shall not have provided written acceptance
thereof to Administrative Agent on or prior to the Business Day prior to the
date of such prepayment shall be deemed to have declined such Option. Any amount
of such voluntary prepayment so declined pursuant to the Option shall be applied
(i) first, pro rata to the remaining Amortization Payments of the Tranche A Term
----- --- ----
<PAGE>
-39-
Loans; and (ii) second, to the extent that no Tranche A Term Loans are
------
outstanding after giving effect to the application required by the previous
clause (i), to Tranche B Term Loans of the holders thereof who had not declined
prepayment in inverse order of maturity with respect to the remaining
Amortization Payments thereunder.
Notwithstanding the foregoing, and without limiting the rights and
remedies of the Lenders under Section 10, in the event that any Event of Default
shall have occurred and be continuing, Administrative Agent may (and at the
request of the Majority Lenders shall) suspend the right of Borrower to Convert
any Loan into a LIBOR Loan, or to Continue any Loan as a LIBOR Loan, in which
event all Loans shall be Converted (on the last day(s) of the respective
Interest Periods therefor) or Continued, as the case may be, as Alternate Base
Rate Loans.
2.10. Mandatory Prepayments. (a) Prepayment Events. Borrower shall
--------------------- -----------------
prepay the Loans as follows (each such prepayment to be effected in each case in
the manner, order and to the extent specified in subsection (b) below of this
Section 2.10):
(i) Casualty Events. On the date on which any Company receives any
---------------
Net Available Proceeds from any Casualty Event, in an aggregate principal
amount equal to 100% of such Net Available Proceeds; provided, however,
-------- -------
that so long as no Default then exists or would arise therefrom and such
Net Available Proceeds do not exceed $5.0 million, such Net Available
Proceeds shall not be required to be so applied on such date to the extent
that Borrower has delivered an Officers' Certificate to Administrative
Agent on or prior to such date stating that such proceeds shall be used to
(1) repair, replace or restore any Property in respect of which such Net
Available Proceeds were paid or (2) fund the substitution of other Property
used or usable in the business of the Companies, in each case within 180
days following the date of the receipt of such Net Available Proceeds;
provided, further, however, that (i) all such Net Available Proceeds in
-------- ------- -------
excess of the remainder of $1.0 million less any amount not held in the
Collateral Account by virtue of the analogous provision of Section
2.10(a)(iii) or (v) shall be held in the Collateral Account and released
therefrom only in accordance with the terms of the Security Agreement, (ii)
if the amount of such Net Available Proceeds exceeds $5.0 million, then the
entire amount and not just the portion in excess of $5.0 million shall be
applied and (iii) if all or any portion of such Net Available Proceeds not
required to be applied to the prepayment of Term Loans pursuant to the
preceding proviso is not so used within 180 days after the date of the
receipt of such Net Available Proceeds, such remaining portion shall be
applied on the last day of such period as specified in Section 2.10(b).
(ii) Equity Issuance; Debt Issuance. Upon any Equity Issuance or any
------------------------------
Debt Issuance after the Closing Date, in an aggregate principal amount
equal to 50% of the Net Available Proceeds of such Equity Issuance (it
being understood that Acquisitions effected with the issuance of common
stock shall not require any prepayment) or 100% of the Net Available
Proceeds of such Debt Issuance, as the case may be. The foregoing
provisions of this Section 2.10(a)(ii) do not apply with respect to any Net
Available Proceeds of any Debt Issuance or Equity Issuance provided on
terms and conditions satisfactory to the Majority Lenders and the Joint
Lead Arrangers after the Closing Date to the extent such Net Available
Proceeds of any such Debt Issuance or Equity Issuance is simultaneously
used to effect the consummation of any Acquisition made pursuant to Section
9.06(b).
(iii) Disposition Events. Upon the date of receipt of any Net
------------------
Available Proceeds from any Disposition Event, in an aggregate principal
amount equal to 100% of the Net Available Proceeds from such Disposition
Event to the extent such Net Available Proceeds, when added to the Net
Available
<PAGE>
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Proceeds of each other Disposition during the same calendar year exceeds
$250,000; provided, however, that (i) the Net Available Proceeds from any
-------- -------
Disposition Event permitted by Section 9.06(j) shall not be required to be
applied as provided herein on such date if and to the extent that (1) no
Default then exists or would arise therefrom and (2) Borrower delivers an
Officers' Certificate to Administrative Agent on or prior to such date
stating that such Net Available Proceeds shall be reinvested in capital
assets of the Companies in each case within 180 days following the date of
such Disposition Event (which certificate shall set forth the estimates of
the proceeds to be so expended) and (ii) all such Net Available Proceeds in
excess of the remainder of $1.0 million less any amount not held in the
Collateral Account by virtue of the analogous provision of Section
2.10(a)(i) or (v) shall be held in the Collateral Account and released
therefrom only in accordance with the terms of the Security Agreement;
provided, further, however, that if all or any portion of such Net
-------- ------- -------
Available Proceeds not so applied as provided herein is not so used within
such 180 day period, such remaining portion shall be applied on the last
day of such period as specified in Section 2.10(b) (it being understood
that the foregoing shall in no way affect the obligation of Borrower to
obtain the consent of the Majority Lenders if required pursuant to this
Agreement).
(iv) Other Required Prepayments. If the terms of any agreement,
--------------------------
instrument or indenture pursuant to which any Indebtedness pari passu with
---- -----
or junior in right of payment to the Loans is outstanding (or pursuant to
which such Indebtedness is guaranteed) require prepayment of such
Indebtedness out of the proceeds of any Disposition or otherwise, unless
such proceeds are used to prepay other Indebtedness, then, to the extent
not otherwise required by this Section 2.10(a), the Loans shall be repaid
in an amount equal to the amount that would be required to be prepaid at
such time as and upon such terms so that such other Indebtedness will not
be required to be prepaid pursuant to the terms of the agreement, indenture
or instrument or guarantee governing such other Indebtedness.
(v) Recovery Events. On the date on which any Company receives any
---------------
Net Available Proceeds from any Taking or Destruction or loss of title to
any Mortgaged Real Property or Real Property, in an aggregate principal
amount equal to 100% of such Net Available Proceeds; provided, however,
-------- -------
that (i) so long as no Default then exists or would arise therefrom and
such Net Available Proceeds do not exceed $5.0 million, such Net Available
Proceeds shall not be required to be so applied on such date to the extent
that Borrower has delivered an Officers' Certificate to Administrative
Agent on or prior to such date stating that such proceeds shall be used to
(1) repair, replace or restore any Mortgaged Real Property (or, if received
in respect of Real Property which is not Mortgaged Real Property, Real
Property) in respect of which such Net Available Proceeds were paid or (2)
fund the purchase of substitute or additional Mortgaged Real Property (or
Real Property if such Net Available Proceeds were received in respect of
Real Property which was not Mortgaged Real Property), in each case within
180 days following the date of the receipt of such Net Available Proceeds
and (ii) all such Net Available Proceeds in excess of the remainder of $1.0
million less any amount not held in the Collateral Account by virtue of the
analogous provision of Section 2.10(a)(i) or (iii) shall be held in the
Collateral Account and released therefrom only in accordance with the terms
of the Security Agreement; provided, further, however, that (i) if the
-------- ------- -------
amount of such Net Available Proceeds exceeds $5.0 million, then the entire
amount and not just the portion in excess of $5.0 million shall be applied
and (ii) if all or any portion of such Net Available Proceeds not required
to be applied to the prepayment of Term Loans pursuant to the preceding
proviso is not so used within 180 days after the date of the receipt of
such Net Available Proceeds, such remaining portion shall be applied on the
last day of such period as specified in Section 2.10(b).
<PAGE>
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(vi) Pension Plan Refund. On the date on which any Company receives
-------------------
any cash payments (net of any reasonable costs associated therewith,
including income, excise and other taxes payable thereon) from any return
of surplus assets from any single Plan or Foreign Pension Plan in an amount
equal to 100% of such net amount.
(vii) Excess Cash Flow. Not later than 90 days after the end of each
----------------
fiscal year of Borrower commencing with the fiscal year ended August 31,
1999, in an aggregate principal amount equal to 75% of Borrower's Excess
Cash Flow for each such fiscal year.
(b) Application. The amount of any required prepayments described in
-----------
Section 2.10(a) shall be applied as follows:
(i) first, the amount of the required prepayment shall be applied to
-----
the reduction of Amortization Payments on the Term Loans required by
Section 3.01(b) pro rata among the Term Loan Tranches based upon the
--- ----
remaining unpaid amounts thereof and (A) as to Tranche A Term Loans, the
amount to be applied thereto shall be applied pro rata to the remaining
--- ----
Amortization Payments of such Tranche A Term Loans based on the remaining
unpaid amounts thereof and (B) as to the Tranche B Term Loans, the amount
to be applied thereto shall be applied in inverse order of maturity to the
remaining Amortization Payments thereunder. Notwithstanding the foregoing,
any holder of Tranche B Term Loans at its sole discretion may, with respect
to any mandatory prepayment, so long as any Tranche A Term Loans are then
outstanding (after giving effect to the application of such required
prepayment to the Tranche A Term Loans), elect by written notice provided
to Administrative Agent not to have all or any amount of any such required
prepayments applied to such holder's Tranche B Term Loans, in which case
the aggregate amount so declined shall be applied pro rata to the remaining
--- ----
Amortization Payments of the Tranche A Term Loans; provided, however, that
-------- -------
to the extent that the aggregate principal amount of the Tranche A Term
Loans after giving effect to such mandatory prepayment is less than the
aggregate amount so declined by the holders of the Tranche B Term Loans,
such amount so declined shall be allocated to the declining holders of the
Tranche B Term Loans pro rata based on the remaining aggregate amount of
--- ----
their amounts declined; and
(ii) second, after such time as no Term Loans remain outstanding,
------
Revolving Credit Commitments shall be permanently reduced (at the same time
that the prepayment of the Term Loans would have been made and assuming an
unlimited amount thereof then outstanding) pro rata in an amount equal to
--- ----
the remaining amount of any such required prepayment that would have been
applied to the Term Loans (assuming an unlimited amount thereof then
outstanding) and to the extent that, after giving effect to such reduction,
the aggregate principal amount of Revolving Credit Loans, plus the
----
aggregate amount of all Letter of Credit Liabilities would exceed the
Revolving Credit Commitments, Borrower shall, first, prepay outstanding
-----
Revolving Credit Loans and second, provide cover for Letter of Credit
------
Liabilities as specified in Section 2.10(d), in an aggregate amount equal
to such excess. Any application to the Revolving Credit Commitments shall
reduce the required scheduled reduction amounts under Section 2.04(a) pro
---
rata.
----
Notwithstanding the foregoing, if the amount of any prepayment of
Loans required under this Section 2.10 shall be in excess of the amount of the
Alternate Base Rate Loans at the time outstanding, only the portion of the
amount of such prepayment as is equal to the amount of such outstanding
Alternate Base Rate Loans shall be immediately prepaid and, at the election of
Borrower, the balance of such required prepayment shall be either (i) deposited
in the Collateral Account and applied to the prepayment of LIBOR Loans on the
last day of the then next-expiring Interest Period for LIBOR Loans or (ii)
prepaid immediately, together with any
<PAGE>
-42-
amounts owing to the Lenders under Section 5.05. Notwithstanding any such
deposit in the Collateral Account, interest shall continue to accrue on such
Loans until prepayment.
(c) Revolving Credit Extension Reductions. Until the Revolving
-------------------------------------
Credit Commitment Termination Date, Borrower shall from time to time immediately
prepay the Swing Loans and the Revolving Credit Loans (and/or provide cover for
Letter of Credit Liabilities as specified in Section 2.10(d)) in such amounts as
shall be necessary so that at all times the aggregate outstanding amount of the
Revolving Credit Loans, PLUS the aggregate outstanding amount of Swing Loans,
plus the aggregate outstanding Letter of Credit Liabilities shall not exceed the
- ----
Revolving Credit Commitments, such amount to be applied, first, to Swing Loans,
-----
second, to Revolving Credit Loans outstanding and, third, as cover for Letter of
- ------ -----
Credit Liabilities outstanding as specified in Section 2.10(d).
(d) Cover for Letter of Credit Liabilities. In the event that
--------------------------------------
Borrower shall be required pursuant to this Section 2.10 to provide cover for
Letter of Credit Liabilities, Borrower shall effect the same by paying to
Administrative Agent immediately available funds in an amount equal to the
required amount; (i) such funds shall be retained by Administrative Agent in the
Collateral Account (as provided in the Security Agreement as collateral security
in the first instance for the Letter of Credit Liabilities) until such time as
all Letters of Credit shall have been terminated and all of the Letter of Credit
Liabilities paid in full and (ii) the Collateral Account shall be reduced by any
reduction in required amounts necessary to provide cover for Letter of Credit
Liabilities.
2.11. Replacement of Lenders. Borrower shall have the right, if no
----------------------
Default or Event of Default then exists, to replace such Lender (the "Replaced
--------
Lender") with one or more other Eligible Person reasonably acceptable to
- ------
Administrative Agent (collectively, the "Replacement Lender") if (x) such Lender
------------------
is charging Borrower increased costs pursuant to Section 5.01 or Section 5.06 in
excess of those being charged generally by the other Lenders or such Lender
becomes incapable of making LIBOR Loans as provided in Section 5.03, and/or (y)
as provided in Section 12.04(b), such Lender refuses to consent to certain
proposed amendments, waivers or modifications with respect to this Agreement or
the other Credit Documents, and/or (z) such Lender shall have failed to fund its
portion of a Loan it is obligated to fund under Section 2.01 or the Issuing
Lender shall have failed to issue any Letter of Credit it is obligated to issue
under Section 2.03; provided, however, that (i) at the time of any replacement
-------- -------
pursuant to this Section 2.11, the Replacement Lender shall enter into one or
more assignment agreements (and with all fees payable pursuant to said Section
12.06 to be paid by the Replacement Lender) pursuant to which the Replacement
Lender shall acquire all of the Commitments and outstanding Loans of, and in
each case Letter of Credit Interests by, the Replaced Lender and, in connection
therewith, shall pay to (x) the Replaced Lender an amount equal to the sum of
(A) the principal of, and all accrued interest on, all outstanding Loans of the
Replaced Lender, (B) all Reimbursement Obligations owing to such Replaced
Lender, together with all then unpaid interest with respect thereto at such
time, and (C) all accrued, but theretofore unpaid, fees owing to the Replaced
Lender pursuant to Section 2.05, and (y) the Issuing Lender an amount equal to
such Replaced Lender's Revolving Credit Commitment Percentage of any
Reimbursement Obligations (which at such time remains a Reimbursement
Obligation) to the extent such amount was not theretofore funded by such
Replaced Lender, and (ii) all obligations of Borrower then owing to the Replaced
Lender (other than those specifically described in clause (i) above in respect
of which the assignment purchase price has been, or is concurrently being, paid)
shall be paid in full to such Replaced Lender concurrently with such
replacement. Upon the execution of the respective assignment agreement, the
payment of amounts referred to in clauses (i) and (ii) above and, if so
requested by the Replacement Lender, delivery to the Replacement Lender of Notes
executed by Borrower, the Replacement Lender shall become a Lender hereunder and
the Replaced Lender shall cease to constitute a Lender hereunder and be released
of all its obligations as a Lender, except with respect to indemnification
provisions applicable to the Replaced Lender under this Agreement, which shall
survive as to such Replaced Lender.
<PAGE>
-43-
2.12. Annual Cleandown. For one consecutive 30-day period during the
----------------
first fiscal quarter of each fiscal year beginning in the fiscal year beginning
September 1, 1999, the sum of the aggregate principal amount of Revolving Credit
Loans and Swing Loans plus the face amount of all outstanding Letters of Credit
shall not exceed $3.0 million.
Section 3. Payments of Principal and Interest.
----------------------------------
3.01. Repayment of Loans.
------------------
(a) Revolving Credit Loans and Swing Loans. Borrower hereby promises
--------------------------------------
to pay to Administrative Agent for the account of each Revolving Credit Lender
the entire outstanding principal amount of such Lender's Revolving Credit Loans,
and each Revolving Credit Loan shall mature, on the Revolving Credit Commitment
Termination Date. Borrower hereby promises to pay to the Swing Loan Lender for
its account the entire outstanding principal amount of the Swing Loans, and the
Swing Loans shall mature, on the Swing Loan Maturity Date.
(b) (1) Tranche A Term Loans. Borrower hereby promises to pay to
--------------------
Administrative Agent for the account of the Tranche A Term Loan Lenders, in
repayment of the principal of the Tranche A Term Loans, the amounts set forth
below in Section 3.01(c) on the dates set forth below in Section 3.01(c)
(subject to adjustment for any prepayments required by Section 2.10 to the
extent actually made).
(2) Tranche B Term Loans. Borrower hereby promises to pay to
--------------------
Administrative Agent, for the account of the Tranche B Term Loan Lenders, in
repayment of the principal of the Tranche B Term Loans, the amounts set forth
below in Section 3.01(c) on the dates set forth below in Section 3.01(c)
(subject to adjustment for any prepayments required by Section 2.10 to the
extent actually made).
(c) Term Loans. Borrower hereby promises to pay to Administrative
----------
Agent, for the respective accounts of each appropriate Term Loan Lender, in
repayment of the principal of the appropriate Term Loan, the following amounts
on the following dates (subject to adjustment for any prepayments required by
Section 2.10 to the extent actually made):
<TABLE>
<CAPTION>
=======================================================================
TRANCHE A TERM TRANCHE B TERM
PRINCIPAL PAYMENT DATE LOANS LOANS
-----------------------------------------------------------------------
<S> <C> <C>
February 1999 $1,000,000 $100,000
-----------------------------------------------------------------------
May 1999 1,000,000 100,000
-----------------------------------------------------------------------
August 1999 1,000,000 100,000
-----------------------------------------------------------------------
November 1999 1,500,000 100,000
-----------------------------------------------------------------------
February 2000 1,500,000 100,000
-----------------------------------------------------------------------
May 2000 1,500,000 100,000
-----------------------------------------------------------------------
August 2000 1,500,000 100,000
-----------------------------------------------------------------------
November 2000 2,000,000 100,000
-----------------------------------------------------------------------
February 2001 2,000,000 100,000
=======================================================================
</TABLE>
<PAGE>
-44-
<TABLE>
<S> <C> <C>
=======================================================================
May 2001 2,000,000 100,000
-----------------------------------------------------------------------
August 2001 2,000,000 100,000
-----------------------------------------------------------------------
November 2001 2,125,000 100,000
-----------------------------------------------------------------------
February 2002 2,125,000 100,000
-----------------------------------------------------------------------
May 2002 2,125,000 100,000
-----------------------------------------------------------------------
August 2002 2,125,000 100,000
-----------------------------------------------------------------------
November 2002 2,375,000 125,000
-----------------------------------------------------------------------
February 2003 2,375,000 125,000
-----------------------------------------------------------------------
May 2003 2,375,000 125,000
-----------------------------------------------------------------------
August 2003 2,375,000 125,000
-----------------------------------------------------------------------
November 2003 * 9,500,000
-----------------------------------------------------------------------
February 2004 * 9,500,000
-----------------------------------------------------------------------
May 2004 * 9,500,000
-----------------------------------------------------------------------
August 2004 * 9,500,000
=======================================================================
</TABLE>
3.02. Interest. Borrower hereby promises to pay to Administrative
--------
Agent for the account of each Lender interest on the unpaid principal amount of
each Loan made by such Lender for the period from and including the date of such
Loan to but excluding the date such Loan shall be paid in full, at the following
rates per annum:
--- -----
(a) during such periods as such Loan is an Alternate Base Rate Loan,
the Alternate Base Rate (as in effect from time to time), plus the
----
Applicable Margin and
(b) during such periods as such Loan is a LIBOR Loan, for each
Interest Period relating thereto, the LIBOR Rate for such Loan for such
Interest Period, plus the Applicable Margin.
----
Notwithstanding the foregoing, Borrower hereby promises to pay to Administrative
Agent for the account of each Lender interest at the applicable Post-Default
Rate on any principal of any Loan made by such Lender, on any Reimbursement
Obligation held by such Lender and on any other amount payable by Borrower
hereunder or under the Notes held by such Lender to or for account of such
Lender, that shall not be paid in full when due (whether at stated maturity, by
acceleration, by mandatory prepayment or otherwise), for the period from and
including the due date thereof to but excluding the date the same is paid in
full.
Accrued interest on each Loan shall be payable (i) in the case of an
Alternate Base Rate Loan, quarterly on the Quarterly Dates, (ii) in the case of
a LIBOR Loan, on the last day of each Interest Period therefor and, if such
Interest Period is longer than three months, at three-month intervals following
the first day of such Interest Period and (iii) in the case of any LIBOR Loan,
upon the payment or prepayment thereof or the Conversion of such Loan to a Loan
of another Type (but only on the principal amount so paid, prepaid or
Converted), except that interest payable at the Post-Default Rate shall be
payable from time to time on demand.
<PAGE>
-45-
Promptly after the determination of any interest rate provided for herein or any
change therein, Administrative Agent shall give notice thereof to the Lenders to
which such interest is payable and to Borrower.
Section 4. Payments; Pro Rata Treatment; Computations; Etc.
-----------------------------------------------
4.01. Payments. (a) Except to the extent otherwise provided herein,
--------
all payments of principal, interest, Reimbursement Obligations and other amounts
to be made by Borrower under this Agreement and the Notes, and, except to the
extent otherwise provided therein, all payments to be made by the Obligors under
any other Credit Document, shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to Administrative Agent at
its account at the Principal Office, not later than 1:00 p.m. New York time on
the date on which such payment shall become due (each such payment made after
such time on such due date to be deemed to have been made on the next succeeding
Business Day).
(b) Borrower shall, at the time of making each payment under this
Agreement or any Note for the account of any Lender, specify (in accordance with
Sections 2.09 and 2.10, if applicable) to Administrative Agent (which shall so
notify the intended recipient(s) thereof) the Loans, Reimbursement Obligations
or other amounts payable by Borrower hereunder to which such payment is to be
applied (and if an Event of Default has occurred and is continuing,
Administrative Agent may distribute such payment to the Lenders for application
in such manner as it or the Majority Lenders, subject to Section 4.02, may
determine to be appropriate).
(c) Except to the extent otherwise provided in the second sentence
of Section 2.03(g), each payment received by Administrative Agent under this
Agreement or any Note for the account of any Lender shall be paid by
Administrative Agent to such Lender, in immediately available funds, (x) if the
payment was actually received by Administrative Agent prior to 1:00 p.m. (New
York time) on any day, on such day and (y) if the payment was actually received
by Administrative Agent after 1:00 p.m. (New York time) on any day, on the
following Business Day (it being understood that to the extent that any such
payment is not made in full by Administrative Agent, Administrative Agent shall
pay to such Lender, upon demand, interest at the Federal Funds Rate from the
date such amount was required to be paid to such Lender pursuant to the
foregoing clauses until the date Administrative Agent pays such Lender the
amount).
(d) If the due date of any payment under this Agreement or any Note
would otherwise fall on a day that is not a Business Day, such date shall be
extended to the next succeeding Business Day, and interest shall be payable for
any principal so extended for the period of such extension.
4.02. Pro Rata Treatment. Except to the extent otherwise provided
------------------
herein: (a) each borrowing of Loans of a particular Class from the Lenders under
Section 2.01 shall be made from the relevant Lenders, each payment of commitment
fee under Section 2.05 in respect of Commitments of a particular Class shall be
made for account of the relevant Lenders, and each termination or reduction of
the amount of the Commitments of a particular Class under Section 2.04 shall be
applied to the respective Commitments of such Class of the relevant Lenders, pro
---
rata according to the amounts of their respective Commitments of such Class;
- ----
provided, however, that Swing Loans shall be made only by, and interest thereon
- -------- -------
shall be paid by Borrower only to, the Swing Loan Lender (subject to such
Lender's obligations in respect of any participation therein purchased by the
other Revolving Credit Lenders as provided in Section 2.01(e)); (b) except as
otherwise provided in Section 5.04, LIBOR Loans of any Class having the same
Interest Period shall be allocated pro rata among the relevant Lenders according
--- ----
to the amounts of their respective Revolving Credit Commitments and Term Loan
Commitments (in the case of the making of Loans) or their respective Revolving
Credit Loans and Term Loans (in the case of Conversions and Continuations of
Loans); (c) each payment or prepayment of principal of Revolving Credit Loans or
Term Loans by Borrower shall be made for account of the relevant Lenders pro
---
rata in
- ----
<PAGE>
-46-
accordance with the respective unpaid outstanding principal amounts of the Loans
of such Class held by them; and (d) each payment of interest on Revolving Credit
Loans and Term Loans by Borrower shall be made for account of the relevant
Lenders pro rata in accordance with the amounts of interest on such Loans then
--- ----
due and payable to the respective Lenders.
4.03. Computations. Interest on LIBOR Loans and letter of credit fees
------------
shall be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which payable and interest on Alternate Base Rate Loans and Reimbursement
Obligations and commitment fees shall be computed on the basis of a year of 365
or 366 days, as the case may be, and actual days elapsed (including the first
day but excluding the last day) occurring in the period for which payable.
Notwithstanding the foregoing, for each day that the Alternate Base Rate is
calculated by reference to the Federal Funds Rate, interest on Alternate Base
Rate Loans and Reimbursement Obligations shall be computed on the basis of a
year of 365 days and actual days elapsed (including the first day but excluding
the last day).
4.04. Minimum Amounts. Except for mandatory prepayments made pursuant
---------------
to Section 2.10 and Conversions or prepayments made pursuant to Section 5.04,
each borrowing, Conversion and prepayment of principal of Loans (other than
Swing Loans, for which minimum amounts are referred to in Section 2.01(e)) shall
be in an amount at least equal to $500,000 with respect to Alternate Base Rate
Loans and $500,000 with respect to LIBOR Loans and in multiples of $100,000 in
excess thereof (borrowings, Conversions or prepayments of or into Loans of
different Types or, in the case of LIBOR Loans, having different Interest
Periods at the same time hereunder to be deemed separate borrowings, Conversions
and prepayments for purposes of the foregoing, one for each Type or Interest
Period). Anything in this Agreement to the contrary notwithstanding, the
aggregate principal amount of LIBOR Loans having the same Interest Period shall
be in an amount at least equal to $1.0 million and in multiples of $500,000 in
excess thereof and, if any LIBOR Loans would otherwise be in a lesser principal
amount for any period, such Loans shall be Alternate Base Rate Loans during such
period.
4.05. Certain Notices. Notices by Borrower to Administrative Agent of
---------------
terminations or reductions of the Commitments, of borrowings, Conversions,
Continuations and optional prepayments of Loans and of Classes of Loans, of
Types of Loans and of the duration of Interest Periods shall be irrevocable and
shall be effective only if received by Administrative Agent not later than 11:00
a.m. New York time on the number of Business Days prior to the date of the
relevant termination, reduction, borrowing, Conversion, Continuation or
prepayment or the first day of such Interest Period specified below:
<TABLE>
<CAPTION>
===========================================================================================
NUMBER OF BUSINESS
NOTICE DAYS PRIOR
- -------------------------------------------------------------------------------------------
<S> <C>
Termination or reduction of Commitments 2
- -------------------------------------------------------------------------------------------
Borrowing or optional prepayment of, or Conversions into, same day
Alternate Base Rate Loans (including Swing Loans)
- -------------------------------------------------------------------------------------------
Borrowing or optional prepayment of, Conversions into, Con- 3
tinuations as, or duration of Interest Period for, LIBOR Loans
===========================================================================================
</TABLE>
Each such notice of termination or reduction shall specify the amount and the
Class of the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or prepayment shall specify the Class of
Loans to be borrowed, Converted, Continued or prepaid and the amount (subject to
Section 4.04)
<PAGE>
-47-
and Type of each Loan to be borrowed, Converted, Continued or prepaid and the
date of borrowing, Conversion, Continuation or prepayment (which shall be a
Business Day). Each such notice of the duration of an Interest Period shall
specify the Loans to which such Interest Period is to relate. Administrative
Agent shall promptly notify the Lenders of the contents of each such notice. In
the event that Borrower fails to select the Type of Loan, or the duration of any
Interest Period for any LIBOR Loan, within the time period and otherwise as
provided in this Section 4.05, such Loan (if outstanding as a LIBOR Loan) will
be automatically Converted into an Alternate Base Rate Loan on the last day of
the then current Interest Period for such Loan or (if outstanding as an
Alternate Base Rate Loan) will remain as, or (if not then outstanding) will be
made as, an Alternate Base Rate Loan.
4.06. Non-Receipt of Funds by Administrative Agent. Unless
--------------------------------------------
Administrative Agent shall have received written notice from a Lender or
Borrower (the "PAYOR") prior to the date on which the Payor is to make payment
-----
to Administrative Agent of (in the case of a Lender) the proceeds of a Loan to
be made by such Lender hereunder or (in the case of Borrower) a payment to
Administrative Agent for the account of one or more of the Lenders hereunder
(such payment being herein called the "Required Payment"), which notice shall be
----------------
effective upon receipt, that the Payor does not intend to make the Required
Payment to Administrative Agent, Administrative Agent may assume that the
Required Payment has been made and may, in reliance upon such assumption (but
shall not be required to), make the amount thereof available to the intended
recipient(s) on such date; and, if the Payor has not in fact made the Required
Payment to Administrative Agent, the recipient(s) of such payment shall, on
demand, repay to Administrative Agent the amount so made available together with
interest thereon in respect of each day during the period commencing on the date
(the "Advance Date") such amount was so made available by Administrative Agent
------------
until the date Administrative Agent recovers such amount at a rate per annum
--- -----
equal to the Federal Funds Rate for such day and, if such recipient(s) shall
fail promptly to make such payment, Administrative Agent shall be entitled to
recover such amount, on demand, from the Payor, together with interest as
aforesaid; provided, however, that if neither the recipient(s) nor the Payor
-----------------
shall return the Required Payment to Administrative Agent within three Business
Days of the Advance Date, then, retroactively to the Advance Date, the Payor and
the recipient(s) shall each be obligated to pay interest on the Required Payment
as follows (without double recovery):
(i) if the Required Payment shall represent a payment to be
made by Borrower to the Lenders, Borrower and the recipient(s) shall
each be obligated retroactively to the Advance Date to pay interest in
respect of the Required Payment at the Post-Default Rate (without
duplication of the obligation of Borrower under Section 3.02 to pay
interest on the Required Payment at the Post-Default Rate), it being
understood that the return by the recipient(s) of the Required Payment
to Administrative Agent shall not limit such obligation of Borrower
under Section 3.02 to pay interest at the Post-Default Rate in respect
of the Required Payment and
(ii) if the Required Payment shall represent proceeds of a
Loan to be made by the Lenders to Borrower, the Payor and Borrower
shall each be obligated retroactively to the Advance Date to pay
interest in respect of the Required Payment pursuant to Section 3.02,
it being understood that the return by Borrower of the Required Payment
to Administrative Agent shall not limit any claim Borrower may have
against the Payor in respect of such Required Payment.
4.07. Right of Setoff; Sharing of Payments, Etc. (a) Each
-----------------------------------------
Obligor agrees that, in addition to (and without limitation of) any right of
setoff, banker's lien or counterclaim a Lender may otherwise have, each Lender
shall be entitled, at its option (to the fullest extent permitted by law), to
set off and apply any deposit (general or special, time or demand, provisional
or final), or other indebtedness, held by it for the credit or account of such
Obligor at any of its offices, in Dollars or in any other currency, against any
principal of or interest
<PAGE>
-48-
on any of such Lender's Loans, Reimbursement Obligations or any other amount
payable to such Lender hereunder that is not paid when due (regardless of
whether such deposit or other indebtedness is then due to such Obligor), in
which case it shall promptly notify such Obligor and Administrative Agent
thereof; provided, however, that such Lender's failure to give such notice shall
-----------------
not affect the validity thereof.
(b) Each of the Lenders agrees that, if it should receive
(other than pursuant to Section 5) any amount hereunder (whether by voluntary
payment, by realization upon security, by the exercise of the right of setoff or
banker's lien, by counterclaim or cross action, by the enforcement of any right
under the Credit Documents, or otherwise) which is applicable to the payment of
the principal of, or interest on, the Loans, Reimbursement Obligations or fees,
of a sum which with respect to the related sum or sums received by other Lenders
is in a greater proportion than the total of such amounts then owed and due to
such Lender bears to the total of such amounts then owed and due to all of the
Lenders immediately prior to such receipt, then such Lender receiving such
excess payment shall purchase for cash without recourse or warranty from the
other Lenders an interest in the Obligations of the respective Obligor to such
Lenders in such amount as shall result in a proportional participation by all of
the Lenders in such amount; provided, however, that if all or any portion of
-----------------
such excess amount is thereafter recovered from such Lender, such purchase shall
be rescinded and the purchase price restored to the extent of such recovery, but
without interest. Borrower consents to the foregoing arrangements.
(c) Borrower agrees that any Lender so purchasing such a
participation may exercise all rights of setoff, banker's lien, counterclaim or
similar rights with respect to such participation as fully as if such Lender
were a direct holder of Loans or other amounts (as the case may be) owing to
such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to
exercise any such right or shall affect the right of any Lender to exercise, and
retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of any Obligor. If, under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a secured claim in lieu of
a setoff to which this Section 4.07 applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Lenders entitled under this Section 4.07 to
share in the benefits of any recovery on such secured claim.
Section 5. Yield Protection, Etc.
---------------------
5.01. Additional Costs. (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 or the
NAIC made subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Note, any Letter of
Credit or any Lender's participation therein, any Letter of Credit
Document or any LIBOR Loan made by it or change the basis of taxation
of payments to such Lender in respect thereof (except, in each case,
for taxes excluded from the definition of Covered Taxes covered by
Section 5.06 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 LIBOR Rate hereunder,
including,
<PAGE>
-49-
without limitation, the imposition of any reserves with respect to the
Eurocurrency Liabilities under Regulation D; 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 LIBOR Loans or issuing or
participating in Letters of Credit or to reduce any amount receivable hereunder
in respect thereof then, in any such case, to the extent permitted by law,
Borrower shall pay within 15 days 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 subsection, it shall promptly notify Borrower, through
Administrative Agent, of the event by reason of which it has become so entitled.
A certificate as to any additional amounts setting forth the calculation of such
additional amounts pursuant to this Section 5.01 submitted by such Lender,
through Administrative Agent, to Borrower shall be conclusive in the absence of
clearly demonstrable error. This covenant shall survive the termination of this
Agreement and the payment of the Notes all other amounts payable hereunder.
(b) In the event that any Lender shall have in good faith
determined that the adoption of any law, rule, regulation or guideline regarding
capital adequacy (or any change therein or in the interpretation or application
thereof) or compliance by any 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 central bank or Governmental Authority, including,
without limitation, the issuance of any final rule, regulation or guideline,
does 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 or
under any Letter of Credit to a level below that which such Lender or such
corporation could have achieved but for such adoption, change or compliance
(taking into consideration such Lender's or such corporation's policies with
respect to capital adequacy) by an amount deemed by such Lender to be material,
then from time to time, after submission by such Lender to Borrower (with a copy
to Administrative Agent) of a written request therefor, to the extent permitted
by law, Borrower shall within 15 days pay to such Lender such additional amount
or amounts as will compensate such Lender for such reduction.
(c) Each Lender (and Issuing Lender) shall notify Borrower of
any event that will entitle such Lender (or Issuing Lender, as the case may be)
to compensation under paragraph (a) or (b) of this Section 5.01 as promptly as
practicable, but in any event within 90 days after such Lender (or Issuing
Lender, as the case may be) obtains actual knowledge thereof; provided, however,
-----------------
that (i) if any Lender (or Issuing Lender, as the case may be) fails to give
such notice within 90 days after it obtains actual knowledge of such an event,
such Lender (or Issuing Lender, as the case may be) shall, with respect to
compensation payable pursuant to this Section 5.01 in respect of any costs
resulting from such event, only be entitled to payment under this Section 5.01
for costs incurred from and after the date 90 days prior to the date that such
Lender (or Issuing Lender, as the case may be) does give such notice and (ii)
each Lender (or Issuing Lender, as the case may be), will designate a different
Applicable Lending Office for the Loans of such Lender (or the Letters of
Credit, as the case may be) affected by such event if such designation will
avoid the need for, or reduce the amount of, such compensation and will not, in
the sole opinion of such Lender (or Issuing Lender, as the case may be), be
disadvantageous to such Lender (or Issuing Lender, as the case may be). Each
Lender (or Issuing Lender, as the case may be) will furnish to Borrower at the
time of request for compensation under paragraph (a) or (b) of this Section 5.01
a certificate setting forth the basis, amount and reasonable detail of
computation of each request by such Lender for compensation under paragraph (a)
or (b) of this Section 5.01, which certificate shall, except for demonstrable
error, be final, conclusive and binding for all purposes
<PAGE>
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5.02. Limitation on Types of Loans. Anything herein to the
----------------------------
contrary notwithstanding, if, on or prior to the determination of any LIBOR Base
Rate for any Interest Period:
(i) Administrative Agent determines, which good faith
determination shall be conclusive, that quotations of interest rates
for the relevant deposits referred to in the definition of "LIBOR Base
Rate" in Section 1.01 are not being provided in the relevant amounts or
for the relevant maturities for purposes of determining rates of
interest for LIBOR Loans as provided herein; or
(ii) if the related Loans are Revolving Credit Loans, the
Majority Revolving Credit Lenders or, if the related Loans are Tranche
A Term Loans, the Majority Tranche A Term Lenders or, if the related
Loans are Tranche B Term Loans, the Majority Tranche B Term Lenders
determine, which determination shall be conclusive, that the relevant
rates of interest referred to in the definition of "LIBOR Base Rate" in
Section 1.01 upon the basis of which the rate of interest for LIBOR
Loans for such Interest Period is to be determined are not likely
adequately to cover the cost to the applicable Lenders of making or
maintaining LIBOR Loans for such Interest Period,
then Administrative Agent shall give Borrower and each Lender prompt notice
thereof, and so long as such condition remains in effect, the affected Lenders
shall be under no obligation to make additional LIBOR Loans, to Continue LIBOR
Loans or to Convert Alternate Base Rate Loans into LIBOR Loans and Borrower
shall, on the last day(s) of the then current Interest Period(s) for the
outstanding LIBOR Loans, either prepay such Loans or Convert such Loans into
Alternate Base Rate Loans in accordance with Section 2.09.
5.03. Illegality. Notwithstanding any other provision of this
----------
Agreement, in the event that any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender or
its Applicable Lending Office to honor its obligation to make or maintain LIBOR
Loans hereunder (and, in the sole opinion of such Lender, the designation of a
different Applicable Lending Office would either not avoid such unlawfulness or
would be disadvantageous to such Lender), then such Lender shall promptly notify
Borrower thereof (with a copy to Administrative Agent) and such Lender's
obligation to make or Continue, or to Convert Loans of any other Type into,
LIBOR Loans shall be suspended until such time as such Lender may again make and
maintain LIBOR Loans (in which case the provisions of Section 5.04 shall be
applicable).
5.04. Treatment of Affected Loans. If the obligation of any
---------------------------
Lender to make LIBOR Loans or to Continue, or to Convert Alternate Base Rate
Loans into, LIBOR Loans shall be suspended pursuant to Section 5.03, such
Lender's LIBOR Loans shall be automatically Converted into Alternate Base Rate
Loans on the last day(s) of the then current Interest Period(s) for such LIBOR
Loans (or on such earlier date as such Lender may specify to Borrower with a
copy to Administrative Agent as is required by law) and, unless and until such
Lender gives notice as provided below that the circumstances specified in
Section 5.03 which gave rise to such Conversion no longer exist:
(i) to the extent that such Lender's LIBOR Loans have been
so Converted, all payments and prepayments of principal which would
otherwise be applied to such Lender's LIBOR Loans shall be applied
instead to its Alternate Base Rate Loans; and
(ii) all Loans which would otherwise be made or Continued by
such Lender as LIBOR Loans shall be made or Continued instead as
Alternate Base Rate Loans and all Alternate Base Rate Loans of such
Lender which would otherwise be Converted into LIBOR Loans shall remain
as Alternate Base Rate Loans.
<PAGE>
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If such Lender gives notice to Borrower with a copy to Administrative Agent that
the circumstances specified in Section 5.03 which gave rise to the Conversion of
such Lender's LIBOR Loans pursuant to this Section 5.04 no longer exist (which
such Lender agrees to do promptly upon such circumstances ceasing to exist) at a
time when LIBOR Loans are outstanding, such Lender's Alternate Base Rate Loans
shall be automatically Converted, on the first day(s) of the next succeeding
Interest Period(s) for such outstanding LIBOR Loans, to the extent necessary so
that, after giving effect thereto, all Loans held by the Lenders holding LIBOR
Loans and by such Lender are held PRO RATA (as to principal amounts, Types and
--- ----
Interest Periods) in accordance with their respective Commitments.
5.05. Compensation. (a) 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 (1) default by Borrower in
payment when due of the principal amount of or interest on any LIBOR Loan, (2)
default by Borrower in making a borrowing of, Conversion into or Continuation of
LIBOR Loans after Borrower has given a notice requesting the same in accordance
with the provisions of this Agreement, (3) default by Borrower in making any
prepayment after Borrower has given a notice thereof in accordance with the
provisions of the Agreement or (4) the making of a payment or a prepayment of
LIBOR Loans on a day which is not the last day of an Interest Period with
respect thereto, including in each case, any such loss (including loss of
margin) or expense arising from the reemployment of funds obtained by it or from
fees payable to terminate the deposits from which such funds were obtained.
(b) For the purpose of calculation of all amounts payable to a
Lender under this Section 5.05 each Lender shall be deemed to have actually
funded its relevant LIBOR Loan through the purchase of a deposit bearing
interest at the LIBOR Rate in an amount equal to the amount of the LIBOR Loan
and having a maturity comparable to the relevant Interest Period; provided,
--------
however, that each Lender may fund each of its LIBOR Loans in any manner it
- -------
seems fit, and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this subsection. Any Lender requesting
compensation pursuant to this Section 5.05 will furnish to Administrative Agent
and Borrower a certificate setting forth the basis and amount of such request
and such certificate, absent manifest error, shall be conclusive. This covenant
shall survive the termination of this Agreement and the payment of the Notes and
all other amounts payable hereunder.
5.06. Net Payments. (a) All payments made by Borrower or any
------------
Subsidiary Guarantor hereunder or under any Note and the Guarantees will be made
without setoff, counterclaim or other defense. Except as provided in Section
5.06(b), all such payments will be made free and clear of, and without deduction
or withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by any
Governmental Authority or by any political subdivision or taxing authority
thereof or therein with respect to such payments (but excluding, except as
provided in the second succeeding sentence, any tax imposed on or measured by
the net income or net profits of a Lender pursuant to the laws of the
jurisdiction in which it is organized or the jurisdiction in which the principal
office or Applicable Lending Office of such Lender is located or any
jurisdiction in which such Lender conducts business or any subdivision thereof
or therein) and all interest, penalties or similar liabilities with respect
thereto (all such non-excluded taxes, levies, imposts, duties, fees, assessments
or other charges being referred to collectively as "Covered Taxes"). If any
-------------
Covered Taxes are so levied or imposed, Borrower and each Subsidiary Guarantor,
as the case may be, agrees to pay the full amount of such Covered Taxes, and
such additional amounts as may be necessary so that every payment of all amounts
due under this Agreement, the Guarantees or under any Note, after withholding or
deduction for or on account of any Covered Taxes, will not be less than the
amount provided for herein or in such Note. If any amounts are payable in
respect of Covered Taxes pursuant to the preceding sentence, Borrower and each
Subsidiary Guarantor jointly and severally agrees to reimburse each Lender, upon
the written request of such Lender, (i) for taxes imposed on or measured by the
net income or net profits of
<PAGE>
-52-
such Lender pursuant to the laws of the jurisdiction in which such Lender is
organized or in which the principal office or Applicable Lending Office of such
Lender is located or under the laws of any political subdivision or taxing
authority of any such jurisdiction by reason of the making of payments in
respect of Covered Taxes pursuant to this Section (including pursuant to this
sentence) and (ii) for any withholding of taxes as such Lender shall determine
are payable by, or withheld from, such Lender in respect of amounts paid in
respect of Covered Taxes to or on behalf of such Lender pursuant to the
preceding sentence and in respect of any amounts paid to or on behalf of such
Lender pursuant to this sentence; provided, however, that Borrower's and each
-----------------
Subsidiary Guarantor's obligations shall be reduced by any Tax Benefit described
in the following paragraph. Borrower and each Subsidiary Guarantors, as the case
may be, will furnish to Administrative Agent within 45 days after the date the
payment of any Covered Taxes is due pursuant to applicable law certified copies
of tax receipts or other documentation evidencing such payment by Borrower.
Borrower and each Subsidiary Guarantor jointly and severally agree to indemnify
and hold harmless each Lender, and reimburse such Lender upon its written
request, for the amount of any Covered Taxes so levied or imposed and paid by
such Lender and any liability (including penalties, additions to tax, interest
and expenses) arising therefrom or with respect thereto.
If Borrower or any Subsidiary Guarantor pays any additional
amount under this Section 5.06 to a Lender and such Lender determines in its
reasonable discretion that it has actually received or realized in connection
therewith any refund or any reduction of, or credit against, its tax liabilities
in or with respect to the taxable year in which the additional amount is paid (a
"Tax Benefit"), such Lender shall pay to Borrower or such Subsidiary Guarantor,
-----------
as the case may be, an amount that the Lender shall, in its reasonable
discretion, determine is equal to the net benefit, after tax, which was obtained
by the Lender in such year as a consequence of such Tax Benefit; provided,
--------
however, that (i) such Lender shall not be required to make any payment under
- -------
this paragraph of this Section 5.06(a) if an Event of Default shall have
occurred and be continuing; (ii) any taxes that are imposed on a Lender as a
result of a disallowance or reduction (including through the expiration of any
tax credit carryover or carryback of such Lender that otherwise would not have
expired) of any Tax Benefit with respect to which such Lender has made a payment
to Borrower or any Subsidiary Guarantor pursuant to this paragraph of this
Section 5.06(a) shall be treated as a tax for which Borrower or any Guarantor is
obligated to indemnify such Lender pursuant to this Section 5.06 without any
exclusions or defenses; and (iii) nothing in this paragraph of this Section
5.06(a) shall require the Lender to disclose any confidential information to
Borrower or any Subsidiary Guarantor (including, without limitation, its tax
returns or its computations relating to the determination of the Tax Benefit).
(b) Each Lender that is not a United States person (as such
term is defined in Section 7701(a)(30) of the Code) (a "Non-U.S. Lender") agrees
---------------
to deliver to Borrower and Administrative Agent on or prior to the Closing Date,
or in the case of a Lender that is an assignee or transferee of an interest
under this Agreement pursuant to Section 12.06 (unless the respective Lender was
already a Lender hereunder immediately prior to such assignment or transfer), on
the date of such assignment or transfer to such Lender, (i) two accurate and
complete original signed copies of Internal Revenue Service Form 4224 or 1001
(or successor forms) certifying to such Lender's entitlement to a complete
exemption from, or reduction in rate of, United States withholding tax with
respect to payments to be made under this Agreement and under any Note (or, with
respect to any assignee Lender, at least as extensive as the assigning Lender),
or (ii) if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A)
of the Code and cannot deliver either Internal Revenue Service Form 1001 or 4224
pursuant to clause (i) above, (x) a certificate substantially in the form of
Exhibit H (any such certificate, a "Section 5.06 Certificate") and (y) two
- --------- ------------------------
accurate and complete original signed copies of Internal Revenue Service Form
W-8 (or successor form) certifying to such Lender's entitlement to a complete
exemption from, or reduction in rate of, United States withholding tax with
respect to payments to be made under this Agreement and under any Note (or, with
respect to any assignee Lender, at least as extensive as the assigning Lender).
In addition, each Lender agrees that from time to time after the Closing Date,
when a lapse in time or change in circum-
<PAGE>
-53-
stances renders the previous certification obsolete or inaccurate in any
material respect, it will deliver to Borrower and Administrative Agent two new
accurate and complete original signed copies of Internal Revenue Service Form
4224 or 1001, or Form W-8 and a Section 5.06 Certificate, as the case may be,
and such other forms as may be required in order to confirm or establish the
entitlement of such Lender to a continued exemption from or reduction in United
States withholding tax with respect to payments under this Agreement and any
Note, or it shall immediately notify Borrower and Administrative Agent of its
inability to deliver any such Form or Certificate, in which case such Lender
shall not be required to deliver any such form or certificate pursuant to this
Section 5.06(b). Notwithstanding the foregoing, no Lender shall be required to
deliver any such form or certificate if a change in treaty, law or regulation
has occurred prior to the date on which such delivery would otherwise be
required that renders any such form or certificate inapplicable or would prevent
the Lender from duly completing and delivering any such form or certificate with
respect to it and such Lender so advises Borrower. Borrower shall not be
required to indemnify any Non-U.S. Lender, or to pay any additional amounts to
any Non-U.S. Lender, in respect of U.S. Federal withholding tax pursuant to
paragraph (a) above to the extent that (i) the obligation to withhold amounts
with respect to U.S. Federal withholding tax existed on the date such Non-U.S.
Lender became a party to this Agreement; provided, however, that this clause (i)
-----------------
shall not apply to the extent that (x) the indemnity payments or additional
amounts any Lender would be entitled to receive (without regard to this clause
(i)) do not exceed the indemnity payment or additional amounts that the Person
making the assignment or transfer to such Lender would have been entitled to
receive in the absence of such assignment, participation or transfer, or (y)
such assignment or transfer had been requested by Borrower, or (ii) the
obligation to pay such additional amounts would not have arisen but for a
failure by such Non-U.S. Lender to comply with the provisions of this Section
5.06(b). Notwithstanding anything to the contrary contained in the preceding
sentence or elsewhere in this Section 5.06 and except as set forth in Section
12.06(b), Borrower agrees to pay additional amounts and to indemnify each Lender
in the manner set forth in Section 5.06(a) (without regard to the identity of
the jurisdiction requiring the deduction or withholding) in respect of any
amounts deducted or withheld by it as described in the immediately preceding
sentence as a result of any changes after the Closing Date in any applicable
law, treaty, governmental rule, regulation, guideline or order, or in the
interpretation thereof, relating to the deducting or withholding of Covered
Taxes.
(c) In addition, Borrower and each Subsidiary Guarantor
jointly and severally agrees to pay any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or under the Note or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or the
Notes (hereinafter referred to as "Other Taxes").
-----------
Section 6. Guarantee.
---------
6.01. The Guarantee. The Subsidiary Guarantors hereby jointly
-------------
and severally guarantee as a primary obligor and not as a surety to each Lender
and Administrative Agent and their respective successors and assigns the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the principal of and interest on the Loans made by the Lenders to,
and the Notes held by each Lender of, Borrower and all other amounts from time
to time owing to the Lenders or Administrative Agent by Borrower under this
Agreement and under the Notes and by any Obligor under any of the other Credit
Documents, and all obligations of Borrower or any Subsidiary to any Lender or
any Affiliate of any Lender in respect of any Swap Contract and all Obligations
owing to the Issuing Lender under the Letter of Credit Documents, in each case
strictly in accordance with the terms thereof (such obligations being herein
collectively called the "Guaranteed Obligations"). The Subsidiary Guarantors
----------------------
hereby jointly and severally agree that if Borrower shall fail to pay in full
when due (whether at stated maturity, by acceleration or otherwise) any of the
Guaranteed Obligations, the Subsidiary Guarantors will promptly pay the same,
without any demand or notice whatsoever, and that in the case of any extension
of time of payment or renewal of any of the Guaranteed Obligations, the same
will be promptly
<PAGE>
-54-
paid in full when due (whether at extended maturity, by acceleration or
otherwise) in accordance with the terms of such extension or renewal.
6.02. Obligations Unconditional. The obligations of the
-------------------------
Subsidiary Guarantors under Section 6.01 are absolute, irrevocable and
unconditional, joint and several, irrespective of the value, genuineness,
validity, regularity or enforceability of the obligations of Borrower under this
Agreement, the Notes or any other agreement or instrument referred to herein or
therein, or any substitution, release or exchange of any other guarantee of or
security for any of the Guaranteed Obligations, and, to the fullest extent
permitted by applicable law, irrespective of any other circumstance whatsoever
that might otherwise constitute a legal or equitable discharge or defense of a
surety or Subsidiary Guarantor (except for payment in full). Without limiting
the generality of the foregoing, it is agreed that the occurrence of any one or
more of the following shall not alter or impair the liability of the Subsidiary
Guarantors hereunder which shall remain absolute, irrevocable and unconditional
under any and all circumstances as described above:
(i) at any time or from time to time, without notice to the
Subsidiary Guarantors, the time for any performance of or compliance
with any of the Guaranteed Obligations shall be extended, or such
performance or compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of
this Agreement or the Notes or any other agreement or instrument
referred to herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall
be accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under this
Agreement, the Notes or any other Credit Document or any other
agreement or instrument referred to herein or therein shall be amended,
modified or waived in any respect or any other guarantee of any of the
Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with;
(iv) the release of any other Subsidiary Guarantor.
The Subsidiary Guarantors hereby expressly waive diligence, presentment, demand
of payment, protest and all notices whatsoever, and any requirement that
Administrative Agent or any Lender exhaust any right, power or remedy or proceed
against Borrower under this Agreement or the Notes or any other agreement or
instrument referred to herein or therein, or against any other Person under any
other guarantee of, or security for, any of the Guaranteed Obligations. The
Subsidiary Guarantors waive any and all notice of the creation, renewal,
extension, waiver, termination or accrual of any of the Guaranteed Obligations
and notice of or proof of reliance by any Lender upon this guarantee or
acceptance of this guarantee, and the Guaranteed Obligations, and any of them,
shall conclusively be deemed to have been created, contracted or incurred in
reliance upon this guarantee, and all dealings between Borrower and the Lenders
shall likewise be conclusively presumed to have been had or consummated in
reliance upon this guarantee. This guarantee shall be construed as a continuing,
absolute, irrevocable and unconditional guarantee of payment without regard to
any right of offset with respect to the Guaranteed Obligations at any time or
from time to time held by the Lenders, and the obligations and liabilities of
the Subsidiary Guarantors hereunder shall not be conditioned or contingent upon
the pursuit by the Lenders or any other Person at any time of any right or
remedy against Borrower or against any other Person which may be or become
liable in respect of all or any part of the Guaranteed Obligations or against
any collateral security or guarantee therefor or right of offset with respect
thereto. This guarantee shall remain in full force and effect and be binding in
accordance with and to the extent of its terms upon the Subsidiary Guarantors
and the successors and assigns thereof, and shall inure to the benefit of the
Lenders, and their respective successors and assigns,
<PAGE>
-55-
notwithstanding that from time to time during the term of this Agreement there
may be no Guaranteed Obligations outstanding.
6.03. Reinstatement. The obligations of the Subsidiary
-------------
Guarantors under this Section 6 shall be automatically reinstated if and to the
extent that for any reason any payment by or on behalf of Borrower in respect of
the Guaranteed Obligations is rescinded or must be otherwise restored by any
holder of any of the Guaranteed Obligations, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise. The Subsidiary
Guarantors jointly and severally agree that they will indemnify Administrative
Agent and each Lender on demand for all reasonable costs and expenses (including
reasonable fees of counsel) incurred by Administrative Agent or such Lender in
connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law, other than any costs or expenses
resulting from the gross negligence or bad faith of such Creditor.
6.04. Subrogation; Subordination. Each Subsidiary Guarantor
--------------------------
hereby agrees that until the indefeasible payment and satisfaction in full in
cash of all Guaranteed Obligations and the expiration and termination of the
Commitments of the Lenders under this Agreement it shall not exercise any right
or remedy arising by reason of any performance by it of its guarantee in Section
6.01, whether by subrogation or otherwise, against Borrower or any other
Subsidiary Guarantor of any of the Guaranteed Obligations or any security for
any of the Guaranteed Obligations. The payment of any amounts due with respect
to any indebtedness of Borrower or any other Subsidiary Guarantor now or
hereafter owing to any Subsidiary Guarantor by reason of any payment by such
Subsidiary Guarantor under the Guarantee in this Section 6 is hereby
subordinated to the prior indefeasible payment in full in cash of the Guaranteed
Obligations. Each Subsidiary Guarantor agrees that it will not demand, sue for
or otherwise attempt to collect any such indebtedness of Borrower to such
Subsidiary Guarantor until the Obligations shall have been indefeasibly paid in
full in cash. If, notwithstanding the foregoing sentence, any Subsidiary
Guarantor shall prior to the indefeasible payment in full in cash of the
Guaranteed Obligations collect, enforce or receive any amounts in respect of
such indebtedness, such amounts shall be collected, enforced and received by
such Subsidiary Guarantor as trustee for Administrative Agent and the Lenders
and be paid over to Administrative Agent on account of the Guaranteed
Obligations without affecting in any manner the liability of such Subsidiary
Guarantor under the other provisions of the guaranty contained herein.
6.05. Remedies. The Subsidiary Guarantors jointly and
--------
severally agree that, as between the Subsidiary Guarantors and the Lenders, the
obligations of Borrower under this Agreement and the Notes may be declared to be
forthwith due and payable as provided in Section 10 (and shall be deemed to have
become automatically due and payable in the circumstances provided in said
Section 10) for purposes of Section 6.01 notwithstanding any stay, injunction or
other prohibition preventing such declaration (or such obligations from becoming
automatically due and payable) as against Borrower and that, in the event of
such declaration (or such obligations being deemed to have become automatically
due and payable), such obligations (whether or not due and payable by Borrower)
shall forthwith become due and payable by the Subsidiary Guarantors for purposes
of Section 6.01.
6.06. Instrument for the Payment of Money. Each Subsidiary
-----------------------------------
Guarantor hereby acknowledges that the guarantee in this Section 6 constitutes
an instrument for the payment of money, and consents and agrees that any Lender
or Administrative Agent, at its sole option, in the event of a dispute by such
Subsidiary Guarantor in the payment of any moneys due hereunder, shall have the
right to bring motion-action under New York CPLR Section 3213.
<PAGE>
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6.07. Continuing Guarantee. The guarantee in this Section 6 is
--------------------
a continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
6.08. General Limitation on Guarantee Obligations. In any
-------------------------------------------
action or proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Subsidiary Guarantor under
Section 6.01 would otherwise be held or determined to be void, voidable, invalid
or unenforceable, or subordinated to the claims of any other creditors, on
account of the amount of its liability under Section 6.01, then, notwithstanding
any other provision to the contrary, the amount of such liability shall, without
any further action by such Subsidiary Guarantor, any Lender, Administrative
Agent or any other Person, be automatically limited and reduced to the highest
amount that is valid and enforceable and not subordinated to the claims of other
creditors as determined in such action or proceeding.
Section 7. Conditions Precedent.
--------------------
7.01. Initial Extension of Credit. The obligation of any
---------------------------
Lender to make its initial extension of credit hereunder (whether by making a
Loan or issuing a Letter of Credit) is subject to the satisfaction of the
conditions precedent that:
(i) Date of Borrowing. Such extension of credit shall be
-----------------
made on or before November 30, 1998.
(ii) Documentation and Evidence of Certain Matters. Joint
---------------------------------------------
Lead Arrangers shall have received the following documents, each duly
executed where appropriate (with sufficient conformed copies for each
Lender), each of which shall be reasonably satisfactory to Joint Lead
Arrangers (and to the extent specified below, to each Lender) in form
and substance:
(1) Corporate Documents. (i) Certified copies of the
-------------------
charter and by-laws (or equivalent documents) of each Obligor
and of all corporate authority for each Obligor (including
board of director resolutions and evidence of the incumbency,
including specimen signatures, of officers) with respect to
the execution, delivery and performance of such of the Credit
Documents to which such Obligor is intended to be a party and
each other document to be delivered by such Obligor from time
to time in connection herewith and the extensions of credit
hereunder and the consummation of the Transactions and (ii)
certified copies of the charter and by-laws (or equivalent
documents) of Newco and LLC and all corporate authority of
Newco and LLC (including board of director resolutions and
evidence of the incumbency, including specimen signatures of
officers) with respect to the execution, delivery and
performance of such of the Transaction Documents which Newco
and LLC is intended to be a party and each other document, if
any, to be delivered by Newco and LLC from time to time in
connection herewith and the extensions of credit hereunder.
(2) Officers' Certificates. (i) An Officers'
----------------------
Certificate of Borrower, dated the Closing Date, in form and
substance reasonably satisfactory to Joint Lead Arrangers,
stating that on and as of the Closing Date, after giving
effect to the Transactions, the ratio of Borrower's pro forma
---------
consolidated total debt to pro forma trailing four quarter
---------
EBITDA shall not be greater than 5.0:1.0 and to the effect set
forth in clauses (a) and (b) of Section 7.02(i) and (ii) an
Officer's Certificate from the chief financial officer of
Borrower and, at Borrower's expense, an opinion of a
nationally recognized appraisal firm or valuation consultant
satisfactory
<PAGE>
-57-
to Joint Lead Arrangers in their sole discretion with respect
to the solvency of each Credit Party immediately after the
consummation of the Transactions to occur on the Closing Date.
(3) Opinions of Counsel. (i) Opinion of Hughes &
-------------------
Luce, LLP, special counsel to the Obligors, substantially in
the form of Exhibit E-1, and (ii) opinion of local counsel to
-----------
the Obligors in Iowa and Wisconsin, substantially in the form
of Exhibit E-2 (and each Obligor hereby instructs such counsel
-----------
to deliver such opinion to the Lenders, Joint Lead Arrangers
and Administrative Agent).
(4) Notes. The Notes, duly completed and executed
-----
for each Lender which requests a Note prior to the Closing
Date.
(5) Security Agreement. The Security Agreement
------------------
(which shall be in full force and effect), duly authorized,
executed and delivered by the Obligors and Administrative
Agent, and the certificates identified under the name of such
Obligors in Annex 1A thereto, accompanied by undated stock
powers executed in blank and the notes identified under the
name of such Obligors in Annex 1B thereto, accompanied by
undated notations or instruments of assignment executed in
blank.
(6) Recapitalization Documents. Certified Copies of
--------------------------
each Recapitalization Document in form and substance
satisfactory to Joint Lead Arrangers.
(7) Repayment of Existing Indebtedness. Evidence in
----------------------------------
the form of a "pay-off" letter that the principal of and
interest on, and all other amounts owing in respect of, the
Indebtedness set forth on Schedule 7.01(ii) have been (or
-----------------
shall be simultaneously) paid in full, that any commitments to
extend credit under the agreements or instruments relating to
such Indebtedness have been canceled or terminated and that
all guarantees in respect of, and all Liens securing, any such
Indebtedness have been released (or arrangements for such
release satisfactory to Joint Lead Arrangers have been made);
in addition, from any Person holding any Lien securing any
such Indebtedness, such Uniform Commercial Code termination
statements, mortgage releases and other instruments, in each
case in proper form for recording, as Joint Lead Arrangers
shall have reasonably requested to release and terminate of
record the Liens securing such Indebtedness (or arrangements
for such release and termination reasonably satisfactory to
Joint Lead Arrangers and the Majority Lenders have been made).
(8) Projections; Pro Forma Balance Sheet. (1) A
------------------------------------
budget for fiscal year 1999 and a written analysis of the
business and prospects of Borrower and the Subsidiaries (after
giving effect to the Transactions), and (2) unaudited pro
---
forma consolidated balance sheet of Borrower and the
-----
Subsidiaries as of the Closing Date and after giving effect to
the Transactions, prepared in accordance with GAAP and
reasonably satisfactory to Joint Lead Arrangers, which balance
sheet shall not be materially inconsistent with the forecasts
previously provided to the Lenders.
(9) Environmental Report and Review. Third-party
-------------------------------
environmental reports (including Phase I environmental
assessments or their substantial equivalent) from Borrower and
the Subsidiaries with respect to each Mortgaged Real Property
and with respect to any other Real Property in which Borrower
or any Subsidiary has an interest to the extent reasonably
requested by Joint Lead Arrangers or the Majority Lenders, and
a review of all other Environ-
<PAGE>
-58-
mental Law issues for Property owned by Borrower or any
Subsidiary or in which Borrower or any Subsidiary has an
interest, in each case the results of which shall be in form
and substance reasonably satisfactory to Joint Lead Arrangers.
(10) Insurance. Evidence of insurance complying with
---------
the requirements of Section 9.04 and the Security Documents,
in scope, form and substance satisfactory to Joint Lead
Arrangers and certificates naming Administrative Agent as an
additional insured and/or loss payee, and stating that such
insurance shall not be canceled or revised without 30 days
prior written notice by the insurer to Joint Lead Arrangers.
(iii) Absence of Certain Proceedings. There shall not exist
------------------------------
any threatened or pending action, proceeding or counterclaim by or
before any court or governmental, administrative or regulatory agency
or authority, domestic or foreign, (i) challenging the consummation of
any of the Transactions or that could in the sole judgment of Joint
Lead Arrangers and the Majority Lenders restrain, prevent or impose
burdensome conditions on the Transactions, individually or in the
aggregate, or any other transaction contemplated hereunder or (ii)
seeking to obtain, or having resulted in the entry of, any judgment,
order or injunction that (a) would restrain, prohibit or impose adverse
conditions on the ability of the Lenders to make the Loans under the
Credit Facilities, (b) in the reasonable judgment of Joint Lead
Arrangers and Majority Lenders could be expected to result in a
Material Adverse Effect with respect to Borrower and its subsidiaries
taken as a whole (both before and after giving effect to the
Transactions), (c) affects the legality, validity or enforceability of
any Credit Document or any documents relating thereto or could have a
material adverse effect on the ability of any Credit Party to fully and
timely perform its obligations under the Credit Documents or the rights
and remedies of the Lenders, (d) would be materially inconsistent with
the stated assumptions underlying the projections provided to Joint
Lead Arrangers and the Lenders, or (e) seeks any material damages as a
result thereof, and in the case of (i) and (ii) there is a reasonable
possibility that such action, proceeding or counterclaim would be
successful on the merits.
(iv) Certain Approvals. All governmental (domestic and
-----------------
foreign) and other third-party approvals (including landlords' and
other consents) necessary in connection with the Transactions, the
financing contemplated hereby and the continuing operations of Borrower
and the Subsidiaries shall have been obtained (without the imposition
of any burdensome conditions) and shall be in full force and effect on
the Closing Date (or there shall be a plan satisfactory to Joint Lead
Arrangers and the Majority Lenders in their respective sole discretion
for the obtaining thereof). All applicable waiting periods shall have
expired without any action being taken by any competent authority which
restrains, prevents, or imposes materially adverse conditions upon the
Transactions.
(v) Absence of Certain Events. Since August 31, 1997
-------------------------
there shall not have occurred or become known in the reasonable
judgment of the Majority Lenders any Material Adverse Effect or any
condition or event that in the reasonable judgment of the Lenders could
be expected to result in a Material Adverse Effect (both before and
after giving effect to the Transactions).
(vi) Filings and Lien Searches. The Obligors shall have
-------------------------
authorized, executed and delivered each of the following:
(1) UCC Financing Statements (Form UCC-1) in
appropriate form for filing under the UCC and any other
applicable law, rule or regulation in each jurisdiction as may
be
<PAGE>
-59-
necessary or appropriate to perfect the Liens created, or
purported to be created, by the Security Documents;
(2) certified copies of Requests for Information
(Form UCC-11), tax lien, judgment lien and pending lawsuit
searches or equivalent reports or lien search reports, each of
a recent date listing all effective financing statements, lien
notices or comparable documents that name any Obligor as
debtor and that are filed in those state and county
jurisdictions in which any of the Collateral of such Obligor
is located and the state and county jurisdictions in which
each such Person's principal place of business is located,
none of which encumber the Collateral covered or intended to
be covered by the Security Agreement other than those
encumbrances which constitute Prior Liens;
(3) to the extent equipment or inventory is
maintained on a leased premise, a copy of each Lease or other
agreement relating to such possessory interest; and
(4) evidence of the completion of all recordings and
filings of, or with respect to, the Security Agreement,
including filings with the United States Patent, Trademark and
Copyright offices, and delivery of such other security and
other documents and the taking of all actions as may be
necessary or, in the opinion of Joint Lead Arrangers,
desirable, to perfect the Liens created, or purported to be
created, by the Security Agreement.
(vii) MORTGAGE MATTERS. On or prior to the Closing Date,
----------------
each Obligor shall have cause to be delivered to Administrative Agent,
on behalf of the Lenders:
(1) a Mortgage encumbering each Mortgaged Real
Property in favor of Administrative Agent, for the benefit of
the Lenders, duly executed and acknowledged by the Obligor
that is the owner of or holder of an interest in such
Mortgaged Real Property, and otherwise in form for recording
in the recording office of each political subdivision where
each such Mortgaged Real Property is situated, together with
such certificates, affidavits, questionnaires or returns as
shall be required in connection with the recording or filing
thereof to create a lien under applicable law, and such UCC-1
Financing Statements and other similar statements as are
contemplated by the counsel opinions described in Section
7.01(ii)(3)(ii) in respect of such Mortgage, all of which
shall be in form and substance reasonably satisfactory to
Administrative Agent, and any other instruments necessary to
grant a mortgage lien under the laws of any applicable
jurisdiction, which Mortgage and financing statements and
other instruments shall when recorded be effective to create a
first priority Lien on such Mortgaged Real Property
subordinate to no Liens other than Prior Liens applicable to
such Mortgaged Real Property and subject to no other Liens
except Liens expressly permitted by such Mortgage;
(2) with respect to each Mortgaged Real Property,
such consents, approvals, amendments, supplements, estoppels,
tenant subordination agreements or other instruments as
necessary or required to consummate the Transactions or as
shall reasonably be deemed necessary by Administrative Agent
in order for the owner or holder of the fee or leasehold
interest constituting such Mortgaged Real Property to grant
the Lien contemplated by the Mortgage with respect to such
Mortgaged Real Property;
(3) with respect to each Mortgage, a policy (or
commitment to issue a policy) of title insurance insuring (or
committing to insure) the Lien of such Mortgage as a valid
first
<PAGE>
-60-
mortgage Lien on the real property and fixtures described
therein in an amount equal to 115% of the fair market value
thereof which policies (or commitments) shall (a) be issued by
the Title Company, (b) to the extent necessary, include such
reinsurance arrangements (with provisions for direct access)
as shall be reasonably acceptable to Administrative Agent, (c)
contain a "tie-in" or "cluster" endorsement (if available
under applicable law) (i.e., policies which insure against
losses regardless of location or allocated value of the
insured property up to a stated maximum coverage amount), (d)
have been supplemented by such endorsements (or where such
endorsements are not available, opinions of special counsel,
architects or other professionals reasonably acceptable to
Administrative Agent to the extent that such opinions can be
obtained at a cost which is reasonable with respect to the
value of the Real Property subject to such Mortgage) as shall
be reasonably requested by Administrative Agent (including,
without limitation, endorsements on matters relating to usury,
first loss, last dollar, zoning, contiguity, revolving credit,
doing business, non-imputation, public road access, survey,
variable rate, environmental lien and so-called comprehensive
coverage over covenants and restrictions), and (e) contain no
exceptions to title other than exceptions for the Prior Liens
applicable to such Mortgaged Real Property;
(4) with respect to each Mortgaged Real Property,
policies or certificates of insurance as required by the
Mortgage relating thereto, which policies or certificates
shall comply with the insurance requirements contained in such
Mortgage;
(5) with respect to each Real Property and each
Mortgaged Real Property, UCC, tax lien, judgment lien and
pending lawsuit searches confirming that the personal property
comprising a part of such Real Property or Mortgaged Real
Property is subject to no Liens other than Prior Liens;
(6) with respect to each Mortgaged Real Property,
such affidavits, certificates, information (including
financial data) and instruments of indemnification (including,
without limitation, a so-called "gap" indemnification) as
shall be required to induce the Title Company to issue the
policy or policies (or commitment) and endorsements
contemplated in subparagraph (3) above;
(7) evidence reasonably acceptable to Administrative
Agent of payment by Borrower of all title insurance premiums,
search and examination charges, and related charges, mortgage
recording taxes, fees, charges, costs and expenses required
for the recording of the Mortgages and issuance of the title
insurance policies referred to subparagraph (3) above;
(8) with respect to each Real Property or Mortgaged
Real Property, copies of all Leases, subleases, leases in
which Borrower or any Subsidiary holds the tenant's interest
or other agreements relating to possessory interests, if any.
To the extent any of the foregoing affect any Mortgaged Real
Property, such agreement shall be subordinate to the Lien of
the Mortgage to be recorded against such Mortgaged Real
Property, either expressly by its terms or pursuant to a
subordination, non-disturbance and attornment agreement, and
shall otherwise be acceptable to Administrative Agent;
(9) with respect to each Mortgaged Real Property,
Borrower and each Subsidiary shall have made all notification,
registrations and filings, to the extent required by, and in
accordance with, all State and Local Real Property Disclosure
Requirements applicable to such
<PAGE>
-61-
Mortgaged Real Property, including the use of forms provided
by state or local agencies, where such forms exist, whether to
Borrower or to or with the state or local agency; and
(10) with respect to each Mortgaged Real Property, an
Officers' Certificate or other evidence reasonably
satisfactory to Administrative Agent that as of the date
thereof (a) there is no outstanding citation, violation or
similar notice indicating that the Mortgaged Real Property
contains conditions which are not in compliance with local
codes or ordinances relating to building or fire safety or
structural soundness, (b) there has not occurred any Taking or
Destruction of any Mortgaged Real Property and (c) there are
no material disputes regarding boundary lines, location,
encroachment or possession of such Mortgaged Real Property and
to the best knowledge of Borrower or any Subsidiary that is
the owner of or holder of an interest in such Mortgaged Real
Property, no state of facts existing which could give rise to
any such claim.
(viii) SUBORDINATED FINANCING, PREFERRED STOCK FINANCING,
-------------------------------------------------
COMMON STOCK FINANCING AND BUYOUT GROUP FINANCING. Borrower shall have
-------------------------------------------------
received aggregate gross proceeds of at least $37.0 million from the
Subordinated Financing pursuant to agreements, and terms and conditions
thereunder, in form and substance reasonably satisfactory to Joint Lead
Arrangers and the Majority Lenders. Borrower shall have received
aggregate gross proceeds of at least $3.0 million from the Common Stock
Financing pursuant to agreements, and terms and conditions thereunder,
in form and substance reasonably satisfactory to Joint Lead Arrangers
and the Majority Lenders. Borrower shall have received aggregate gross
proceeds of at least $22.0 million from the Buyout Group Financing
pursuant to agreements, and terms and conditions thereunder, in form
and substance reasonably satisfactory to Joint Lead Arrangers and the
Majority Lenders.
(ix) RECEIPT OF EXECUTION COPIES OF SUBORDINATED NOTE
------------------------------------------------
DOCUMENTS. Joint Lead Arrangers shall have received duly executed
---------
copies of each of the Subordinated Note Documents all in form and
substance reasonably satisfactory to Joint Lead Arrangers and the
Majority Lenders, including: (1) the Subordinated Loan Agreement, (2)
the Subordinated Note, (3) the Subordinated Guarantee, (4) the Stock
and Warrant Purchase Agreement, (5) the Series A Warrants, (6) the
Subordination Agreement, (7) the Certificate of Designation, (8) the
Registration Agreement, and (9) all other documents relating to the
Subordinated Loan Agreement pursuant to which the Subordinated Notes
were issued.
(x) NO OTHER INDEBTEDNESS OR PREFERRED STOCK. After
----------------------------------------
giving effect to the Transactions, the Companies shall have no
outstanding Indebtedness or preferred stock other than the Loans and
the Indebtedness set forth on SCHEDULE 9.08, and Joint Lead Arrangers
-------------
and the Majority Lenders shall be reasonably satisfied with all other
liabilities (contingent or otherwise) of the Companies.
(xi) CONSUMMATION OF TRANSACTIONS. All conditions
----------------------------
precedent under all of the Transaction Documents shall have been
satisfied and consummated in all material respects in accordance with
the terms hereof and the terms of documentation therefor (except to the
extent such conditions have been waived with the prior consent of the
Majority Lenders and Joint Lead Arrangers) prior to or simultaneously
with the initial extensions of credit under this Agreement. No material
provision of the Transaction Documents shall have been amended,
supplemented, waived or otherwise modified without the prior written
consent of Joint Lead Arrangers and the Majority Lenders and the Merger
and the Recapitalization shall be consummated in accordance with the
terms of the Merger Agreement and the other Recapitalization Documents
and all Requirements of Law.
<PAGE>
-62-
(xii) MAXIMUM PURCHASE PRICE. The consideration per share
----------------------
of common stock in the Recapitalization shall not exceed $20.70 per
share and an aggregate of $91.0 million for all shares, and the
aggregate number of Borrower Common Stock (as defined in the Merger
Agreement) issued and outstanding immediately prior to the consummation
of the Merger owned by Borrower's Shareholders, if any, other than
members of the Buyout Group, who shall have exercised or given notice
of their intent to exercise the rights of dissenting shareholders under
the Texas Business Corporation Act shall be less than ten percent (10%)
of the total number of outstanding Common Stock.
(xiii) Management Rollover. Joint Lead Arrangers shall be
-------------------
satisfied with the amount and the terms and conditions of all
management rollover of their equity in Borrower in connection with the
Recapitalization.
(xiv) Total Fees and Expenses. Joint Lead Arrangers shall
-----------------------
have received satisfactory evidence that fees and expenses in
connection with the Transactions will not exceed $9.0 million.
(xv) Margin Rule Compliance. All Loans and other financing
----------------------
to Borrower shall be in full compliance with all applicable
requirements of Regulations T, U and X of the Board of Governors of the
Federal Reserve System.
(xvi) Other Matters. The Lenders shall have received such
-------------
other legal opinions, corporate documents and other instruments and/or
certificates as Joint Lead Arrangers or the Majority Lenders may
request in their reasonable discretion.
(xvii) Payment of Fees and Expenses. All accrued fees and
----------------------------
expenses of the Lenders, Joint Lead Arrangers and Administrative Agent
(including the reasonable fees and expenses of Cahill Gordon & Reindel,
counsel to the Joint Lead Arrangers) in connection with the Credit
Documents shall have been paid in cash in full.
7.02. Initial and Subsequent Extensions of Credit. The
-------------------------------------------
obligation of the Lenders to make any Loan or otherwise extend any credit to
Borrower upon the occasion of each borrowing or other extension of credit
hereunder (including the initial borrowing) is subject to the further conditions
precedent that:
(i) No Default; Representations and Warranties True. Both
-----------------------------------------------
immediately prior to the making of such Loan or other extension of
credit and also after giving pro forma effect thereto and to the
--- -----
intended use thereof:
(a) no Default or Event of Default shall have
occurred and be continuing; and
(b) the representations and warranties made by the
Obligors in Section 8, and by each Obligor in each of the
other Credit Documents to which it is a party, shall be true
and complete in all material respects on and as of the date of
the making of such Loan or other extension of credit with the
same force and effect as if made on and as of such date (or,
if any such representation or warranty is expressly stated to
have been made as of a specific date, as of such specific
date).
(ii) No Proceedings. No material litigation, investigation or
--------------
proceeding before or by any arbitrator or Governmental Authority shall
be continuing or threatened against any Obligor or any of
<PAGE>
-63-
the officers or directors of any thereof in connection with any Credit
Document or any of the transactions contemplated hereby or thereby.
(iii) No Legal Bar. The Loans and the use of proceeds thereof
------------
shall not contravene, violate or conflict with, nor involve any Lender
in a violation of, any law, rule, injunction, or regulation or
determination of any court of law or other Governmental Authority.
(iv) No Material Adverse Effect. There shall not have occurred
--------------------------
any event or circumstances which has had or is reasonably likely to
have a Material Adverse Effect.
(v) Notice of Borrowing. Administrative Agent shall have
-------------------
received a Notice of Borrowing duly completed and complying with
Section 4.05.
Each notice of borrowing or request for the issuance of a
Letter of Credit by Borrower hereunder shall constitute a certification by
Borrower to the effect set forth in clause (i) above (both as of the date of
such notice or request and, unless Borrower otherwise notifies Administrative
Agent prior to the date of such borrowing or issuance, as of the date of such
borrowing or issuance).
Each notice submitted by Borrower hereunder for an extension
of credit hereunder shall constitute a representation and warranty by Borrower,
as of the date of such notice and as of the relevant borrowing date or date of
issuance of a Letter of Credit, as applicable, that the applicable conditions in
Sections 7.01 and 7.02 have been satisfied in accordance with the terms hereof.
7.03. Determinations under Section 7. For purposes of
------------------------------
determining compliance with the conditions specified in Sections 7.01 and 7.02,
each Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of Administrative Agent responsible for the transactions contemplated by this
Agreement shall have received notice from such Lender prior to the date that
Borrower, by notice to the Lenders, designates as the proposed date of the
extension of credit, specifying its objection thereto.
Section 8. Representations and Warranties. Each Obligor
------------------------------
represents and warrants to the Creditors that (at and as of the Closing Date in
each case immediately before and immediately after giving effect to the
Transactions):
8.01. Corporate Existence. Each Company: (a) is a corporation,
-------------------
partnership or other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization; (b) has all
requisite corporate or other power and authority, and has all material
governmental licenses, authorizations, consents and approvals necessary to own
its assets and carry on its business as now being conducted; and (c) is
qualified to do business and is in good standing in all jurisdictions in which
the nature of the business conducted by it makes such qualification necessary
and where failure to be so qualified and in good standing would not have a
Material Adverse Effect.
8.02. Financial Statements; Financial Condition; Etc. (a)
----------------------------------------------
Borrower has heretofore delivered to the Lenders (A) the audited consolidated
balance sheets of Borrower and the Subsidiaries as of August 28, 1993, September
3, 1994, September 2, 1995, August 31, 1996 and August 30, 1997, and the related
statements of earnings, changes in stockholders' equity and cash flows for the
fiscal years ended on those dates, together with reports thereon by Ernst &
Young, LLP, certified public accountants, and (B) the unaudited consolidated
<PAGE>
-64-
balance sheets of Borrower and the Subsidiaries as of November 29, 1997,
February 28, 1998 and May 31, 1998, and the related statements of earnings and
cash flows for the three, six and nine month periods ended on November 29, 1997,
and February 28, 1998, and May 31, 1998, respectively, together with review
reports thereon by Ernst & Young, LLP, certified public accountants. All of said
financial statements, including in each case the related schedules, are true,
complete (in the case of year-end financial statements) and correct in all
material respects, have been prepared in accordance with GAAP consistently
applied and present fairly the financial position of Borrower and the
Subsidiaries as of the respective dates of said balance sheets and the results
of their operations for the respective periods covered thereby, subject (in the
case of interim statements) to period-end audit adjustments. The most recent
balance sheet referred to above reflects, as required by GAAP, any material
Contingent Obligations, contingent liabilities and liabilities for taxes, and
any long-term leases and unusual forward or long-term commitments, including,
without limitation, any interest rate or foreign currency swap or exchange
transaction or other obligation in respect of derivatives, in each case as of
the date of such balance sheet.
(b) Except as set forth in Schedule 8.02 or in the financial
-------------
statements referred to in Section 8.02(a), no Company has any material
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments or anticipated losses from any unfavorable commitments.
(c) Except as set forth in the financial statements referred
to in Section 8.02(a), since August 30, 1997 there has been no Material Adverse
Effect, or any event, change or circumstance which could reasonably be expected
to cause or evidence, either individually or together with any other events,
changes or circumstances, a Material Adverse Effect.
(d) The pro forma balance sheet of Borrower and its
Consolidated Subsidiaries (the "Pro Forma Balance Sheet"), certified by the
-----------------------
chief financial officer of Borrower, copies of which have been heretofore
furnished to each Lender, is the balance sheet of Borrower and its consolidated
Subsidiaries as of August 31, 1998 (the "Pro Forma Date"), adjusted to give
--------------
effect (as if such events had occurred on such date) to the making of the Loans
made on the Closing Date and the application of the proceeds thereof. The Pro
Forma Balance Sheet, together with the notes thereto, was prepared based on good
faith assumptions, and presents fairly in all material respects on a pro forma
basis the consolidated financial position of Borrower and its Consolidated
Subsidiaries as at the Pro Forma Date, adjusted as described above.
8.03. Litigation. Except as disclosed in Schedule 8.03, there
---------- -------------
are no Proceedings or investigations now pending or (to the knowledge of the
Obligors) threatened against or directly affecting any Company that, if
adversely determined could (either individually or in the aggregate) have a
Material Adverse Effect.
8.04. No Breach; No Default. (a) None of the execution,
---------------------
delivery and performance by each Obligor of any Credit Document or any other
Transaction Document to which it is a party and the consummation of the
transactions herein and therein contemplated will (i) conflict with or result in
a breach of, or require any consent (which has not been obtained and is in full
force and effect) under, the charter or by-laws of any Company, or any
applicable law or regulation, or any order, writ, injunction or decree of any
Governmental Authority binding on any Company, or any term or provision of any
Contractual Obligation to which any Company is a party or by which any of them
or any of their Property is bound or to which any of them is subject, or (ii)
constitute (with due notice or lapse of time or both) a default under any such
Contractual Obligation, or (iii) result in the creation or imposition of any
Lien (except for the Liens created pursuant to the Security Documents) upon any
Property of any Company pursuant to the terms of any such agreement or
instrument, except with respect to each of the foregoing which would not (either
individually or in the aggregate) have a Material Adverse Effect.
<PAGE>
-65-
(b) No Company is in default under or with respect to any
Contractual Obligation or any order, award or decree of any Governmental
Authority or arbitrator binding upon it or any of its Properties in any respect
which would (either individually or in the aggregate) have a Material Adverse
Effect.
(c) No Default or Event of Default has occurred and is
continuing.
8.05. Action. Each Company has all necessary corporate power,
------
authority and legal right to execute, deliver and perform its obligations under
each Credit Document and each other Transaction Document to which it is a party
and to consummate the transactions herein and therein contemplated; the
execution, delivery and performance by each Obligor of each Credit Document and
each other Transaction Document to which it is a party and the consummation of
the transactions herein and therein contemplated have been duly authorized by
all necessary corporate action on its part; and this Agreement has been duly and
validly executed and delivered by each Obligor and constitutes, and each of the
Notes, the other Credit Documents and the other Transaction Documents to which
it is a party when executed and delivered by such Obligor (in the case of the
Notes, for value) will constitute, its legal, valid and binding obligation,
enforceable against each Obligor in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws of general applicability
from time to time in effect affecting the enforcement of creditors' rights and
remedies and (b) the application of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
8.06. Approvals. Except as would not individually or in the
---------
aggregate have a Material Adverse Effect, no authorizations, approvals or
consents of, and no filings or registrations with, any Governmental Authority or
any securities exchange are necessary for the execution, delivery or performance
by any Obligor of the Credit Documents or other Transaction Documents to which
it is a party or for the legality, validity or enforceability hereof or thereof
or for the consummation of the transactions herein and therein contemplated,
except for filings and recordings in respect of the Liens created pursuant to
the Security Documents.
8.07. ERISA. Each member of the ERISA Group (x) has fulfilled
-----
its obligations under the minimum funding standards of ERISA and the Code with
respect to each Plan and (y) is in compliance in all material respects with the
presently applicable provisions of ERISA and the Code with respect to each
Benefit Arrangement. No member of the ERISA Group has (i) sought a waiver of the
minimum funding standard under Section 412 of the Code in respect of any Plan,
(ii) failed to make any contribution or payment to any Plan or Multiemployer
Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan
or Benefit Arrangement, which has resulted or could reasonably be expected to
result in the imposition of a Lien or the posting of a bond or other security
under ERISA or the Code, (iii) incurred any accumulated funding deficiency
(whether or not waived) with respect to any Plan, (iv) any direct or indirect
withdrawal liability with respect to any Multiemployer Plan, or any direct or
indirect potential withdrawal liability if it were to withdraw from a
Multiemployer Plan as of the date of determination or (v) incurred any liability
under Title IV of ERISA other than a liability to the PBGC for premiums under
Section 4007 of ERISA. The sum of the amount of unfunded benefit liabilities
(within the meaning of Section 4001(a)(18) of ERISA) under all Plans (excluding
each Plan with an amount of unfunded benefit liabilities of zero or less) is not
more than $1.0 million. There are no actions, liens, suits or claims pending or
threatened (other than routine claims for benefits) with respect to any Benefit
Arrangement that could have a Material Adverse Effect. Each Foreign Pension Plan
has been maintained in substantial compliance with its terms and with the
requirements of any and all applicable laws, statutes, rules, regulations and
orders and has been maintained, where required, in good standing with applicable
regulatory authorities. No Company has incurred any material obligation in
connection with the termination of or withdrawal from any Foreign Pension Plan.
<PAGE>
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8.08. Taxes. Each Company has filed or caused to be filed all
-----
U.S. Federal income tax returns and all other tax returns, domestic or foreign,
required to be filed by it and has paid all taxes payable by it which have
become due or 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
(including the Mortgaged Real Property) by any Governmental Authority (other
than those which, in the aggregate, would not (either individually or in the
aggregate) have a Material Adverse Effect or those the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided on the
books of such Company); and no tax lien has been filed and, to the knowledge of
Borrower, no action, suit, proceeding, investigation, audit or claim is being
asserted or has been threatened by any authority with respect to any such tax,
fee or other charge. No Company has entered into an agreement or waiver
extending any statute of limitations relating to the payment or collection of
taxes of any Company.
8.09. Investment Company Act; Public Utility Holding Company
------------------------------------------------------
Act; Other Restrictions. No Company is an "investment company", or a company
- -----------------------
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended. No Company is a "holding company", or an
"affiliate" of a "holding company" or a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of 1935,
as amended. No Obligor is subject to regulation under any federal or state
statute or regulation (other than Regulation X of the Board of Governors of the
Federal Reserve System) which limits its ability to incur Indebtedness.
8.10. No Burdensome Restrictions. No Contractual Obligation of
--------------------------
any Company and no Requirement of Law has had or could reasonably be expected to
have a Material Adverse Effect.
8.11. Subordinated Notes and PIK Preferred. The subordination
------------------------------------
provisions contained in the Subordinated Note Documents are enforceable against
each Company party thereto, and all Obligations are within the definition of
"Senior Debt" or "Guarantor Senior Debt", as the case may be, included in such
subordination provisions. The Subordinated Notes, the PIK Preferred and the
Common Stock under the Common Stock Financing and the Buyout Group Financing, in
any case, when issued and sold, will either (a) have been registered or
qualified under applicable federal and state securities laws or (b) be exempt
therefrom. The offering documents for the issuance and sale of the Subordinated
Notes, the PIK Preferred and the Common Stock under the Common Stock Financing
and the Buyout Group Financing as of their date, did not contain an untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary to make the statement therein not misleading (it
being understood that no representation or warranty is being made with respect
to information in respect of the initial purchasers thereof expressly provided
by them for inclusion therein).
8.12. Environmental Matters. Except as disclosed in Schedule
--------------------- --------
8.12 and except as would not, individually or in the aggregate, result in a
- ----
Material Adverse Effect: (i) each Company is in compliance with and in the last
five years has been in compliance with, and is not subject to liability under,
any Environmental Laws applicable to it and its business, operations, facilities
and Property owned, leased, operated or used by it, and there are no
Environmental Laws, including such Environmental Laws which have been formally
proposed for public comment, which would reasonably be expected to result in
material expenditures by any Company, and no such Environmental Laws would
reasonably be expected to interfere in any material way with current or
projected operations of any Company ; (ii) no Company has received notice that
it or any of its predecessors in interest has been identified as a potentially
responsible party under the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended ("CERCLA"), or any similar state or
------
foreign law, nor has any Company received notice that any Hazardous Materials
that it or any of its predecessors in interest has used, generated, stored,
treated, handled, transported or disposed of, or arranged for disposal or
treatment of, have been found at any site at which any Person is conducting or
plans to conduct any action pursuant to any Envi-
<PAGE>
-67-
ronmental Law, and no Company, or to the knowledge of any Company, any of its
predecessors in interest, has disposed of, arranged for the disposal or
treatment of, or otherwise released Hazardous Materials at any site at which any
Person is conducting or plans to conduct any action under Environmental Law;
(iii) no Properties now or formerly owned, leased or operated by any Company or,
to the knowledge of any Company, any of its predecessors in interest, are (x)
listed or proposed for listing on the National Priorities List under CERCLA or
(y) listed on the Comprehensive Environmental Response, Compensation and
Liability Information System List promulgated pursuant to CERCLA or (z) included
on any similar lists maintained by any Governmental Authority; (iv) there are no
past or present events, conditions, activities, practices or actions, or any
agreements, judgments, decrees or orders by which any Company is bound, which
would reasonably be expected to prevent any Company's compliance with any
Environmental Law, or which would reasonably be expected to give rise to any
liability of any Company under any Environmental Law, including, without
limitation, liability under CERCLA or similar state or foreign laws; (v) no Lien
has been asserted or recorded, or to the knowledge of any Company, threatened,
under any Environmental Law with respect to any asset, facility, inventory or
Property currently owned, leased or operated by any Company; and (vi) there are
no underground storage tanks or related piping at any Property owned, operated
or leased by any Company, and no such tanks or related piping has been removed
from such properties, and (vii) no Company is subject to any judicial or
administrative Proceeding alleging the violation of, or liability under, any
Environmental Law and, to the knowledge of any Company, no such Proceeding is
threatened.
8.13. Environmental Investigations. All material environmental
----------------------------
investigations, studies, audits or assessments which have been conducted and
which are in the possession, custody or control of any Company relating (i) to
the current or prior business, operations, facilities or any Property of any
Company or any of its predecessors in interest or (ii) to any business,
facility, Property or other asset now or previously owned, operated, leased or
used by any Company or any of its predecessors in interest have been made
available to Administrative Agent.
8.14. Use of Proceeds. No Company is engaged principally, or
---------------
as one of its important activities, in the business of extending credit for the
purpose, whether immediate, incidental or ultimate, of buying or carrying Margin
Stock or to extend credit to others for such purpose or to refund Indebtedness
originally incurred for such purpose and no part of the proceeds of any
extension of credit hereunder will be used directly or indirectly and whether
immediately, incidentally or ultimately to purchase or carry any Margin Stock.
If requested by any Lender or Administrative Agent, Borrower will furnish to
Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 referred to in said Regulation
U. Borrower will use the proceeds of (i) all Term Loans to finance the
Recapitalization and the Existing Credit Facility Repayment as set forth on
Schedule 7.01(ii) and (iii) Revolving Loans to finance the Recapitalization and
- -----------------
the Existing Credit Facility Repayment and pay fees and expenses in connection
with the Recapitalization and the Existing Credit Facility Repayment and to pay
for working capital, capital expenditures and for general corporate purposes;
provided, however, not more than $10 million of the Revolving Loans will be used
- -------- -------
to finance the Recapitalization and the Existing Credit Facility Repayment and
pay fees and expenses related thereto.
8.15. Subsidiaries. On the date hereof (after giving effect to
------------
the Transactions), Borrower has no Subsidiaries or interest in partnerships,
joint ventures or business trusts other than the entities set forth in Schedule
--------
8.15. Borrower owns, as of the Closing Date, the percentage of the issued and
- -----
outstanding Equity Interests or other evidences of the ownership of each
Subsidiary, partnership or joint venture listed on Schedule 8.15 as set forth on
-------------
such Schedule. No such Subsidiary, partnership or joint venture has issued any
securities convertible into shares of its Equity Interests (or other evidence of
ownership) or any Equity Rights to acquire such shares or securities convertible
into such shares (or other evidence of ownership), and the outstanding Eq-
<PAGE>
-68-
uity Interests and securities (or other evidence of ownership) of such
Subsidiaries, partnerships or joint ventures are owned by each Company free and
clear of all Liens and Equity Rights of others of any kind whatsoever, except
for Liens pursuant to the Security Documents.
8.16. Properties. Each Company has good and marketable title
----------
to and beneficial ownership of all Properties and assets held by it, including
all Property reflected in the most recent financial statements delivered
pursuant to this Agreement (except as sold or otherwise disposed of since the
date of such financial statements in the ordinary course of business and in
accordance with this Agreement). Title to each such Property or asset that is
not Collateral is held by each Company free and clear of all Liens except for
Permitted Liens. Title to each such Property or asset that constitutes
Collateral is held by the Obligors free and clear of all Liens other than Prior
Liens and other Liens expressly permitted by the applicable Security Document.
8.17. Security Interest; Absence of Financing Statements. The
--------------------------------------------------
Security Documents, once executed, delivered, filed and/or recorded will create,
in favor of Administrative Agent for the benefit of the Lenders, as security for
the obligations purported to be secured thereby, a valid and enforceable
perfected first priority security interest in and Lien upon all of the
Collateral, superior to and prior to the rights of all third persons other than
the holders of Prior Liens and subject to no other Liens except Liens expressly
permitted by the applicable Security Document.
Except with respect to Permitted Liens which are subordinate
to the Liens of the Security Documents, Prior Liens and the Liens created by the
Security Documents, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry, or other public office, that purports to cover, affect
or give notice of any present or possible future Lien on, or security interest
in, any assets or Property of any Company or rights thereunder.
8.18. Compliance with Laws. Each Company is in compliance with
--------------------
all applicable statutes, laws, ordinances, rules, orders and regulations of any
Governmental Authority in all jurisdictions in which it is presently doing
business, and each Company will comply with all such laws and regulations which
may be imposed in the future in jurisdictions in which it may then be doing
business, in each case other than those the non-compliance with which would not
(individually or in the aggregate) reasonably be expected to have a Material
Adverse Effect. At the time of consummation of the Merger and the
Recapitalization, the Merger and the Recapitalization shall have been
consummated substantially in accordance with the terms of the Merger Agreement
and the Recapitalization Documents and all applicable requirements of law, and
all consents and approvals of all Governmental Authorities required to
consummate the Merger and the Recapitalization have been obtained, given, filed
or taken or waived and are or will be in full force and effect (or effective
judicial relief with respect thereto has been obtained). Additionally, there
does not exist any judgment, order or injunction prohibiting or imposing
material adverse conditions upon the Transactions, or the performance by any
Company of its obligations under the Credit Documents and all Requirements of
Law.
8.19. True and Complete Disclosure. The information, reports,
----------------------------
financial statements, exhibits and schedules furnished in writing by or on
behalf of any of any Company to any Creditor in connection with the negotiation,
preparation or delivery of this Agreement and the other Credit Documents or
included herein or therein or delivered pursuant hereto or thereto or pursuant
to any information memorandum distributed in connection with the syndication of
the Commitment and Loans, including any Transaction Document, whether prior to
or after the date of this Agreement, when taken as a whole, do not, as of the
date such information was furnished, contain any untrue statement of material
fact or omit to state a material fact necessary in order to make the statements
herein or therein, in light of the circumstances under which they were made, not
materially misleading. The projections and pro forma financial information
--- -----
furnished at any time by any Company to any
<PAGE>
-69-
Creditor pursuant to this Agreement have been prepared in good faith based on
assumptions believed by Borrower to be reasonable at the time made, it being
recognized by the Lenders that such financial information as it relates to
future events is not to be viewed as fact and that actual results during the
period or periods covered by such financial information may differ from the
projected results set forth therein by a material amount and no Company,
however, makes any representation as to the ability of Borrower or any
Subsidiary to achieve the results set forth in any such projections. As of the
Closing Date, there is no fact known to any Company (other than general economic
conditions, which conditions are commonly known and affect businesses generally)
that could reasonably be expected to have a Material Adverse Effect that has not
been expressly disclosed herein, in the other Credit Documents or in any other
documents, certificates and statements furnished to Administrative Agent and the
Lenders for use in connection with the transactions contemplated hereby and by
the other Credit Documents.
8.20. Solvency. As of the Closing Date and each other date of
--------
an extension of credit hereunder: (i) the fair saleable value of the Properties
of each Obligor, each taken on a consolidated basis, exceeds and will,
immediately following the making of each Loan or other extension of credit
hereunder, exceed the amount of all debt and liabilities (including all
contingent, subordinated, unmatured and unliquidated liabilities) of such
Obligor; (ii) no Obligor has, or will have, immediately following the making of
each Loan or other extension of credit hereunder, unreasonably small capital to
carry out its business as conducted or as proposed to be conducted; and (iii) no
Obligor intends to, or believes that it will, incur debts beyond its ability to
pay such debts as they mature.
8.21. Employee and Labor Matters. Except as disclosed on
---------------------------
Schedule 8.21, there is (i) no unfair labor practice complaint pending against
- -------------
any Company or, to the knowledge of each Company, threatened against any of
them, before the National Labor Relations Board, and no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending against any Company or, to the knowledge of each Company, threatened
against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending
against any Company or, to the knowledge of each Company, threatened against any
Company and (iii) to the knowledge of each Company, no union representation
question existing with respect to the employees of any Company and, to the
knowledge of each Company, no union organizing activities are taking place,
except (with respect to any matter specified in clause (i), (ii) or (iii) above,
either individually or in the aggregate) such as would not reasonably be
expected to have a Material Adverse Effect. Hours worked by and payments made to
employees of each Company have not been in violation of the Fair Labor Standards
Act or any other applicable Requirements of Law dealing with such matters that
(individually or in the aggregate) could reasonably be expected to have a
Material Adverse Effect. To the knowledge of each Company, all payments due from
any Company on account of employee health and welfare insurance that
(individually or in the aggregate) could reasonably be expected to have a
Material Adverse Effect if not paid have been paid or accrued as a liability on
the books of the relevant Company.
8.22. Intellectual Property. Each Company owns, or is licensed
---------------------
to use, all patents, trademarks, tradenames, servicemarks, copyrights,
technology, trade secrets, know-how and processes necessary for the conduct of
its business as currently conducted (the "Intellectual Property") except for
---------------------
those the failure to own or license which could not, individually or in the
aggregate, have a Material Adverse Effect. No claim has been asserted and is
pending by any Person challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such Intellectual
Property, nor does any Company know of any valid basis for any such claim. The
use of such Intellectual Property by each Company does not infringe the rights
of any Person, except for such claims and infringements that, in the aggregate,
do not have a Material Adverse Effect.
<PAGE>
-70-
8.23. Representations and Warranties in Documents. All
-------------------------------------------
representations and warranties of each Company set forth in each Transaction
Document were true and correct in all material respects as of the time such
representations and warranties were made and shall be true and correct in all
material respects as of the Closing Date as if such representations and
warranties were made on and as of such date, unless stated to relate to a
specific earlier date, in which case such representations and warranties shall
be true and correct in all material respects as of such earlier date. To the
best knowledge of each Company, the representations and warranties of each party
other than the Companies to each Transaction Document contained therein were
true and correct in all material respects on the date made.
8.24. Senior Indebtedness. The Obligations will constitute
-------------------
"Senior Indebtedness" of Borrower under and as defined in the Subordinated Note
Documents. The obligations of each Subsidiary Guarantor under the Guarantee will
constitute "Guarantor Senior Indebtedness" of such Subsidiary Guarantor under
and as defined in the Subordinated Note documents.
8.25. Year 2000. Each Company has reviewed its operations with
---------
a view to assessing whether its business or operations will, and no Company is
aware that any of its key suppliers, vendors or customers will, in the receipt,
transmissions, processing, manipulation, storage, retrieval, retransmission or
other utilization of data, be vulnerable to any significant risk that computer
hardware, software or any equipment containing embedded microchips used in their
business or operations will not in the case of dates or time periods occurring
after December 31, 1999 function at least as effectively as in the case of dates
or time periods occurring prior to January 1, 2000. No Company has reason to
believe that the risks associated with the Year 2000 issue could have a Material
Adverse Effect. For purposes of this Section 8.25, "key supplies, vendors and
customers" refers to those suppliers, vendors and customer of each Company,
whose business failure could reasonably be expected to have a Material Adverse
Effect.
Section 9. Covenants. Each Obligor covenants and agrees with
---------
the Creditors that, so long as any Commitment, Loan or Letter of Credit
Liability is outstanding and until payment in full of all amounts payable by
Borrower hereunder:
9.01. Financial Statements, Etc. Borrower (for itself and on
--------------------------
behalf of the Subsidiary Guarantors) shall deliver to each of the Lenders:
(a) Quarterly and Monthly Financials. (i) As soon as available
--------------------------------
and in any event within 45 days after the end of each of the first
three quarterly fiscal periods of each fiscal year, consolidated
statements of income and cash flow of Borrower and its Consolidated
Subsidiaries for such period and for the period from the beginning of
the respective fiscal year to the end of such period, and the related
consolidated balance sheet of Borrower and its Consolidated
Subsidiaries as at the end of such period, setting forth in each case
in comparative form the corresponding consolidated statement of income
for the corresponding period in the preceding fiscal year, accompanied
by a certificate of a senior financial officer of Borrower, which
certificate shall state that said consolidated financial statements
fairly present the consolidated financial condition and results of
operations of Borrower and its Consolidated Subsidiaries in accordance
with GAAP, consistently applied, as at the end of, and for, such period
(subject to normal year-end audit adjustments); in addition, Borrower
shall provide consolidating financial statements for Foreign
Subsidiaries for the same periods in fiscal years 1998 and thereafter
substantially consistent with the foregoing; and (ii) as soon as
available and in any event within 30 days after the end of each monthly
accounting period in each fiscal year, unaudited consolidated
statements of income and cash flow of Borrower and its Consolidated
Subsidiaries for such monthly period and for the period from the
beginning of the fiscal year to the end of such monthly period, and an
unaudited consolidated
<PAGE>
-71-
balance sheet of Borrower and its Consolidated Subsidiaries as at the
end of such monthly period, setting forth in each case comparisons to
Borrower's annual budget and the corresponding period in the preceding
fiscal year, accompanied by a certificate of a senior financial officer
of Borrower, which certificate shall state that said unaudited
consolidated financial statements are prepared in accordance with GAAP,
consistently applied, as at the end of, and for, such period (subject
to the absence of footnote disclosures and to normal year-end
adjustments for recurring accruals);
(b) Annual Financials. As soon as available and in any event
-----------------
within 90 days after the end of each fiscal year, consolidated
statements of income, retained earnings and cash flow of Borrower and
its Consolidated Subsidiaries for such year and the related
consolidated balance sheet of Borrower and its Consolidated
Subsidiaries as at the end of such year, setting forth in each case in
comparative form (i) the corresponding consolidated figures as of the
end of and for the preceding fiscal year and (ii) the corresponding
budget or plan for such period, accompanied by an opinion, without
material qualification, thereon of independent certified public
accountants of recognized national standing, which opinion shall state
that said consolidated financial statements fairly present the
consolidated financial condition and results of operations of Borrower
and its Consolidated Subsidiaries as at the end of, and for, such
fiscal year in accordance with GAAP; in addition, Borrower shall
provide consolidating financial statements for Foreign Subsidiaries for
the same periods in fiscal years 1998 and thereafter substantially
consistent with the foregoing;
(c) ERISA Information. If and when any member of the ERISA
-----------------
Group (i) gives or is required to give notice to the PBGC of any
"reportable event" (as defined in Section 4043 of ERISA) with respect
to any Plan which might constitute grounds for a termination of such
Plan under Title IV of ERISA or other action by the PBGC with respect
to the Plan, or knows that the plan administrator of any Plan has given
or is required to give notice of any such reportable event, a copy of
the notice of such reportable event given or required to be given to
the PBGC; (ii) receives notice of complete or partial withdrawal
liability under Title IV of ERISA or notice that any Multiemployer Plan
is in reorganization, is insolvent or has been terminated, a copy of
such notice; (iii) receives notice from the PBGC under Title IV of
ERISA of an intent to terminate, impose liability (other than for
premiums under Section 4007 of ERISA) in respect of, or appoint a
trustee to administer any Plan, a copy of such notice; (iv) applies for
a waiver of the minimum funding standard under Section 412 of the Code,
a copy of such application; (v) gives notice of intent to terminate any
Plan under Section 4041(c) of ERISA, a copy of such notice and other
information filed with the PBGC; (vi) gives notice of withdrawal (or
deemed withdrawal under Section 4062(e) of ERISA) from any Plan
pursuant to Section 4063 of ERISA, a copy of such notice; or (vii)
fails to make any payment or contribution to any Plan or Multiemployer
Plan or in respect of any Benefit Arrangement or makes any amendment to
any Plan or Benefit Arrangement which has resulted or could reasonably
be expected to result in the imposition of a Lien or the posting of a
bond or other security under ERISA or the Code, an Officers'
Certificate setting forth details as to such occurrence and action, if
any, which Borrower or the applicable member of the ERISA Group is
required or proposes to take;
(d) Interest Rate Certificates. Together with the financial
--------------------------
statements delivered pursuant to clause (a)(1) or (b) of this Section
9.01, an Interest Rate Certificate;
(e) Notice of Default. Promptly after any Company knows or has
-----------------
reason to believe that any Default has occurred, a notice of such
Default describing the same in reasonable detail and, together with
such notice or as soon thereafter as possible, a description of the
action that Borrower has taken and proposes to take with respect
thereto;
<PAGE>
-72-
(f) Environmental Matters. Written notice of any Environmental
---------------------
Claim materially affecting any Company, any Mortgaged Real Property or
the operations of any Company, and any notice from any Person of (i)
the occurrence of any release, spill or discharge of any Hazardous
Material that is reportable under any Environmental Law, (ii) the
commencement of any clean-up pursuant to or in accordance with any
Environmental Law of any Hazardous Material at, on, under or within the
Mortgaged Real Property or any part thereof or (iii) any other
condition, circumstance, occurrence or event, any of which could
reasonably be expected to result in a material liability of any Company
under any Environmental Law;
(g) Auditors' Reports. Promptly upon receipt thereof, copies
-----------------
of all reports submitted to Borrower by independent certified public
accountants in connection with each annual, interim or special audit of
the books of Borrower made by such accountants, including, without
limitation, any management letter commenting on Borrower's internal
controls submitted by such accountants to management in connection with
their annual audit;
(h) Annual Budgets. An annual budget in reasonable detail and
--------------
financial projections made in good faith, within 60 days after the end
of each fiscal year of Borrower;
(i) Lien Matters. Written notice of (1) the incurrence of any
------------
Lien (other than prior Liens and other Liens expressly permitted by the
terms of the applicable Security Document) on, or claim asserted
against any of the collateral security in the Security Documents or (2)
the occurrence of any other event which could have a Material Adverse
Effect on the aggregate value of the Collateral under any Security
Document;
(j) Reports to Others. Within five days after the same are
-----------------
sent to each creditor or to the shareholders of any Company generally,
copies of all financial statements and reports and proxy statements so
delivered which Borrower sends to the holders of any class of its debt
securities or public equity securities and within five days after the
same are filed, copies of all financial statements and reports which
Borrower may make to, or file with, the Securities and Exchange
Commission or any successor or analogous Governmental Authority; and
promptly following their submission with any Federal, state or local
Governmental Authority, copies of any and all periodic or special
reports filed by any Company, if such reports are publicly available
and indicate any material adverse change in the business, operations or
financial condition of any Company or if copies thereof are requested
by any Lender or Administrative Agent (but only to the extent such
reports are publicly available), and copies of any and all material
notices and other material communications from any Federal, state or
local Governmental Authority with respect to any Company;
(k) Notice of Material Adverse Effect. Written notice of any
---------------------------------
Material Adverse Effect or any event or condition which could result in
a Material Adverse Effect;
(l) Notice of Default. Promptly after any Company knows or has
-----------------
reason to believe that any Default has occurred or that any Company is
in default of any material term or provision of the Subordinated Note
Documents or any other material Contractual Obligation (other than
pursuant to the Credit Documents), a notice of such Default describing
the same in reasonable detail and, together with such notice or as soon
thereafter as possible, a description of the action that Borrower has
taken and proposes to take with respect thereto; and
<PAGE>
-73-
(m) Other Matters. Promptly, such financial and other
-------------
information as any Creditor may from time to time reasonably request.
Borrower will furnish to Administrative Agent,
(i) concurrently with the delivery of the financial statements
referred to in Section 9.01(b), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default relating to the
covenants contained in Section 9.11, except as specified in such
certificate; and
(ii) at the time it furnishes each set of financial statements
pursuant to paragraph (a) or (b) above, (1) a certificate of a senior
financial officer of Borrower (I) to the effect that no Default has
occurred and is continuing (or, if any Default has occurred and is
continuing, describing the same in reasonable detail and describing the
action that Borrower has taken and proposes to take with respect
thereto) and (II) setting forth in reasonable detail the computations
necessary to determine whether Borrower is in compliance with Sections
9.07, 9.08, 9.09, 9.10 and 9.11 as of the end of the respective
quarterly fiscal period or fiscal year, (2) to the extent not
previously disclosed to Administrative Agent, a listing of any state
within the United States where any Obligor keeps inventory or equipment
and of any Intellectual Property arising under the laws of the United
States (or any jurisdiction therein) acquired by any Obligor since the
date of the most recent list delivered pursuant to this clause (II)
(or, in the case of the first such list so delivered, since the Closing
Date), and (3) any final accountants' management letters delivered by
the independent certified public accountants reporting on such
financial statements to any Company.
Administrative Agent shall forward such certificate and
information to the Lenders.
9.02. Litigation, Etc. Borrower shall promptly give to
---------------
Administrative Agent (which shall promptly provide a copy thereof to each
Lender) notice of all Proceedings, and of all Proceedings by or before any
Governmental Authority, and any material development in respect of such
Proceedings, affecting any Company, except Proceedings which could not have
(individually or in the aggregate) a Material Adverse Effect.
9.03. Existence; Compliance with Law; Payment of Taxes;
-------------------------------------------------
Inspection Rights; Performance of Obligations; Etc. Each Company shall, (i)
- --------------------------------------------------
preserve and maintain its legal existence and all of its material rights,
privileges and franchises (provided, however, that nothing in this Section 9.03
-------- -------
shall prohibit any transaction expressly permitted under Section 9.06); (ii)
comply with all applicable Requirements of Law (including ERISA and the rules
and regulations thereunder), rules, regulations and orders of Governmental
Authorities if failure to comply with such requirements would (individually or
in the aggregate) have a Material Adverse Effect; (iii) timely file true,
accurate and complete tax returns required by all Governmental Authorities and
pay and discharge all taxes, assessments and governmental charges or levies
imposed on it or on its income or profits or on any of its Property prior to the
date on which penalties attach thereto (except for any such tax, assessment,
charge or levy the payment of which is being contested in good faith and by
proper proceedings and against which adequate reserves are being maintained in
accordance with GAAP) if such failure to pay and discharge would (individually
or in the aggregate) have a Material Adverse Effect; (iv) maintain all of its
Properties used or useful in its business in good working order and condition,
ordinary wear and tear excepted, except to the extent that the failure to do so
with respect to any such Property would not individually or in the aggregate
have a Material Adverse Effect; (v) permit representatives of any Creditor,
during normal business hours, to examine,
<PAGE>
-74-
copy and make extracts from its books and records, to inspect its Properties,
and to discuss its business and affairs with its officers and employees and with
the independent accountants of Borrower, all to the extent reasonably requested
by such Creditor, provided, however, that Administrative Agent or such Lender
-------- -------
shall notify Borrower prior to any contact with such accountants and give
Borrower the opportunity to participate in such discussions; (vi) perform in all
material respects all of its obligations under the terms of each material
Contractual Obligation by which it is bound or to which it is a party, except
where such failure to so perform, singly or in the aggregate with all other such
failures, would not have a Material Adverse Effect; and (vii) keep proper books
of record and accounts, in which full and correct entries shall be made of all
financial transactions and the Property and business of each Company in
accordance with GAAP in effect from time to time or as otherwise required by
applicable rules and regulations of any Governmental Authority having
jurisdiction over such Company, as relevant. Borrower will confer with the
Lenders in enforcing or waiving material rights of any Company under any
Transaction Document. Borrower shall cause the Recapitalization to be
consummated on the Closing Date in accordance with the terms of the Merger
Agreement and shall comply with all terms and provisions thereof.
9.04. Insurance. Each Company shall keep insured by
---------
financially sound and reputable insurers all Property of a character usually
insured by corporations engaged in the same or similar business similarly
situated against loss or damage of the kinds and in the amounts customarily
insured against by such corporations and carry such other insurance as is
usually carried by such corporations, including, in any event, business
interruption insurance.
Without limiting the foregoing, each Company shall obtain, or
cause to be obtained, and shall maintain or cause to be maintained, at all
times, at its own cost and expense:
(i) Comprehensive general public liability insurance in an
amount reasonable and customary in such Company's industry and
acceptable to Lenders;
(ii) Worker's compensation insurance and employer's liability
insurance in such amounts as may be required by statute;
(iii) Flood insurance if the property is located in an area
designated by the Secretary of Housing and Urban Development as a
special flood hazard area in an amount not to exceed that available for
one hundred percent (100%) reinsurance by the Federal Emergency
Management Agency;
(iv) Business interruption insurance in amounts sufficient to
pay operating expenses, lost rental income and debt service for a
period of at least six (6) months; and
(v) Property insurance by extended coverage endorsement
against loss by fire and other risks of physical loss or damage to the
Property in amounts not less than the full replacement cost of all
improvements (if restored), plus the cost of debris removal.
Borrower shall provide or cause to be provided any other
insurance reasonably requested by Lenders in such amounts and covering such
risks as may be reasonably required. All policies of insurance required to be
maintained by Borrower shall be issued by companies satisfactory to Lenders and
shall have coverages and endorsements and be written for such amount as Lenders
may reasonably require. All policies of insurance required to be maintained by
any Obligor must name Administrative Agent on behalf of Lenders as mortgagees
(in the case of property insurance) or additional insured (in the case of
liability insurance), as applicable, or certificate holder (in the case of
workers' compensation insurance) and must provide that no cancella-
<PAGE>
-75-
tion or modification of the policies will be made without thirty (30) days'
prior written notice to Administrative Agent.
Each policy of insurance obtained or maintained by any Company
shall:
(i) be written by financially responsible companies selected
by Borrower and having an A.M. Best rating of "A" or better and being
in a financial size category of XII or larger, or by other companies
reasonably acceptable to the Majority Lenders;
(ii) provide that the interests of the Creditors shall not be
invalidated by: (A) any act or negligence of any Obligor or any Person
(other than the Lenders or an Agent) having an interest in any property
covered by any Mortgage or other Security Document; (B) any foreclosure
or other proceeding relating to such property; (C) any negligent or
unintentional breach or violation of any warranty, declaration or
condition in any policy of insurance by Borrower; provided, however,
-------- -------
that neither Administrative Agent nor any Lender shall be deemed to
have made any such warranty, declaration or to be subject to any such
condition in respect of any such policy or insurance; or (D) any change
in the title to or ownership of all or any part of the Pledged
Collateral;
(iii) waive all rights of subrogation of the insurers against
the Agents and the Lenders;
(iv) waive any right of the insurers to set-off or
counterclaim or to make any other deduction, whether by way of
attachment or otherwise, as against the Agents or any Lender;
(v) waive all claims for insurance premiums or commissions
or additional premiums or assessments against the Agents and the
Lenders; and
(vi) provide that, except in the case of third-party
liability insurance, the proceeds of any loss affecting real or
personal property or interests shall be applied in accordance with the
terms of the applicable Security Document.
Borrower will advise Administrative Agent promptly of any
material policy cancellation, reduction or amendment.
On or before the day of the initial borrowing hereunder,
Borrower will deliver to Administrative Agent certificates of insurance
reasonably satisfactory to Administrative Agent evidencing the existence of all
insurance required to be maintained by Borrower under this Agreement setting
forth the respective coverages, limits of liability, carriers, policy numbers
and periods of coverage. In addition, no Company will materially modify any of
the provisions of any policy with respect to casualty insurance without
delivering the original copy of the endorsement reflecting such modification to
Administrative Agent. No Company will obtain or carry separate insurance
concurrent in form or contributing in the event of loss with that required by
this Section 9.04 unless Administrative Agent on behalf of the Lenders is named
insured under such insurance, with loss payable as provided in this Agreement.
Borrower will promptly notify Administrative Agent whenever any such separate
insurance is obtained and shall deliver to Administrative Agent the certificates
evidencing the same.
9.05. Limitation on Issuance or Disposals of Capital Stock of
-------------------------------------------------------
Subsidiaries. No Subsidiary shall issue, sell, assign, transfer or otherwise
- ------------
dispose of any shares (or other ownership interests) of any class of its Equity
Interests or of any Equity Rights to purchase its Equity Interests or of other
securities exchangeable for or convertible into its Equity Interests, except (a)
to Borrower or a Wholly Owned Subsidiary and (b) direc
<PAGE>
-76-
tors' qualifying shares as required by law. No Company shall effect the
Disposition of any Equity Interests of any Subsidiary unless all Equity
Interests owned by each Company is sold pursuant thereto.
9.06. Limitation on Fundamental Changes; Limitation on
------------------------------------------------
Acquisitions; Limitation on Dispositions. No Company shall, directly or
- ----------------------------------------
indirectly, (1) enter into any transaction of merger or consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), (2) acquire any business or Property from, or
capital stock of, or be a party to any acquisition of, any Person, or effect any
Acquisition, or (3) effect any Disposition or convey, sell, lease, assign,
transfer or otherwise dispose of, in one transaction or a series of
transactions, all or a substantial part of its business or Property, whether now
owned or hereafter acquired, including receivables and leasehold interests.
Notwithstanding the foregoing provisions of this Section 9.06, each of the
following shall be permitted:
(a) purchases of inventory and other Property to be sold or
used in the ordinary course of business;
(b) Acquisitions permitted by Section 9.09(k);
(c) any Subsidiary may be merged or consolidated or dissolved
or liquidated with or into: (i) Borrower if Borrower shall be the
continuing or surviving corporation or (ii) any Qualified Subsidiary;
provided, however, that a Qualified Subsidiary shall be the continuing
-------- -------
or surviving corporation;
(d) any Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its Property (upon voluntary liquidation or
otherwise) to Borrower or to any Qualified Subsidiary;
(e) any Wholly Owned Subsidiary that is a Foreign Subsidiary
may sell, lease, transfer or otherwise dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to another Wholly
Owned Subsidiary which is a Foreign Subsidiary;
(f) Dispositions of used, worn out, obsolete or surplus
Property by any Company, all in the ordinary course of business;
provided, however, that the proceeds thereof are reinvested in the
-------- -------
business of any Company within one year of such Disposition;
(g) any Foreign Subsidiary may be merged or consolidated with
or into any one or more Wholly Owned Subsidiaries that are Foreign
Subsidiaries (provided that a Wholly Owned Subsidiary that is a Foreign
Subsidiary shall be the continuing or surviving corporation);
(h) any Company may sell or discount, in each case without
recourse, accounts receivable arising in the ordinary course of
business, but only in connection with the compromise or collection
thereof;
(i) any Foreign Subsidiary may sell its accounts receivable;
provided, however, that the terms of each such sale are reasonably
-------- -------
satisfactory in form and substance to Administrative Agent;
(j) any Company may effect any Disposition for fair market
value not to exceed (1) $250,000 in the aggregate for all Companies in
any fiscal year of Borrower and (2) in addition to that permitted by
subclause (1) of this Section 9.06(j) (which shall not count against
this subclause (2)), $3.0 million in the aggregate for all Companies
since the Closing Date (not including any other permitted Disposi-
<PAGE>
-77-
tion pursuant to this Section 9.06); provided, however, clauses (1 )
-------- -------
and (2) above shall be subject to Section 2.10(a)(iii); and
(k) transfers resulting from any casualty or condemnation of
property or assets.
To the extent the Majority Lenders waive the provisions of this Section 9.06
with respect to the sale or other disposition of any Collateral, or any
Collateral is sold or otherwise disposed of as permitted by this Section 9.06
(and such Collateral is released (or permitted to be released) from the Liens
created by the respective Security Document), such Collateral in each case shall
be sold or otherwise disposed of free and clear of the Liens created by the
Security Documents and Administrative Agent shall take such actions as are
appropriate in connection therewith.
9.07. Limitation on Liens and Related Matters. No Company
---------------------------------------
shall, directly or indirectly, create, incur, assume or suffer to exist any Lien
upon or with respect to any Collateral except for Prior Liens and other Liens
expressly permitted by the applicable Security Document. No Company shall,
directly or indirectly, create, incur, assume or suffer to exist any Lien upon
or with respect to any of its Property that does not constitute Collateral,
whether now owned or hereafter acquired, or sell any such property or assets
subject to an understanding or agreement, contingent or otherwise, to repurchase
such property or assets or assign any right to receive income, or file or permit
the filing of any financing statement under the UCC or any other similar notice
of Lien under any similar recording or notice statute, except the following,
which are herein collectively referred to as "Permitted Liens":
---------------
(a) Liens in existence on the date hereof and identified in
Schedule 9.07 (excluding, however, following the making of the initial
-------------
Loans hereunder, Liens securing Indebtedness to be repaid with the
proceeds of such Loans, as indicated on Schedule 7.01(ii));
------------------
(b) Liens imposed by any Governmental Authority for taxes,
assessments or charges not yet due or which are being contested in good
faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the affected Company in
accordance with GAAP;
(c) Liens in respect of Property of any Company imposed by law
which were incurred in the ordinary course of business, such as
carriers', warehousemen's, landlords' and mechanics' Liens and other
similar Liens arising in the ordinary course of business, in each case
for sums the payment of which is not required by Section 9.03;
(d) pledges or deposits under worker's compensation,
unemployment insurance and other social security legislation or the
deposits securing the liability to insurance carriers;
(e) pledges or deposits to secure the performance of bids,
trade contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(f) easements, rights-of-way, restrictions or minor defects or
irregularities in title incurred in the ordinary course of business and
encumbrances consisting of zoning restrictions, easements, licenses,
restrictions on the use of Real Property or minor imperfections in
title thereto which, in the aggregate, are not material in amount, and
which do not in any case materially detract from the value of the Real
Property subject thereto or interfere with the ordinary conduct of the
business of any Company;
<PAGE>
-78-
(g) Liens upon tangible personal Property acquired after the
date hereof by any Company, each of which Liens either (A) existed on
such Property before the time of its acquisition and was not created in
anticipation thereof, or (B) was created solely for the purpose of
securing Indebtedness representing, or incurred to finance, refinance
or refund, the cost of such Property or improvements thereon; provided,
--------
however, that (x) no such Lien shall extend to or cover any Property of
-------
such Company other than the Property so acquired and improvements
thereon and (y) the principal amount of Indebtedness secured by any
such Lien shall at no time exceed 100% of the fair market value of such
Property at the time it was acquired;
(h) Liens existing on any Property of any Person at the time
such Person becomes a Subsidiary or is merged or consolidated with or
into a Subsidiary and, in each case, not created in contemplation of or
in connection with such event; provided, however, that such Liens do
-------- -------
not extend to any other Property of any Company;
(i) Liens (excluding Liens on Collateral) not otherwise
permitted hereunder securing obligations not at any time exceeding in
the aggregate $1.0 million;
(j) Liens securing obligations under Swap Contracts with any
Person party to a Swap Contract so long as at the date of entering into
such Swap Contract such Person was a Lender or any Affiliate of any
Lender to the extent such Swap Contract relates to the Loans and only
so long as the Obligations are secured by the same collateral on a pari
----
passu basis;
-----
(k) Liens consisting of judgment or judicial attachment Liens
(including prejudgment attachment) the enforcement of which is
effectively stayed or payment of which is covered in full (subject to a
customary deductible) by insurance or which do not otherwise result in
an Event of Default under Section 10(h);
(l) Liens securing obligations in respect of Capital Leases
solely on Property subject to such Capital Leases;
(m) any obligations or duties affecting any of the Property of
any Company to any municipality or public authority with respect to any
franchise, grant, license or permit which do not materially impair the
use of such Property for the purposes for which it is held;
(n) leases or subleases granted to third Persons not
interfering in any material respect with the business of any Company;
(o) Liens arising from UCC financing statements regarding
leases permitted by this Agreement;
(p) any interest or title of a lessor or sublessor under any
lease permitted by this Agreement;
(q) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of custom duties in connection
with the importation of goods so long as such Liens attach only to the
imported goods;
(r) Liens arising out of consignment or similar arrangements
for the sale of goods entered into by any Company in the ordinary
course of business;
<PAGE>
-79-
(s) Liens created under this Agreement and/or the other Credit
Documents; and
(t) any extension, renewal or replacement of the foregoing; provided,
--------
however, that the Liens permitted hereunder shall not cover any additional
-------
Indebtedness or Property (other than like Property substituted for Property
covered by such Lien).
Except with respect to (i) specific Property encumbered pursuant to a
Lien permitted to be incurred pursuant to this Section 9.07 or (ii) specific
Property to be sold pursuant to an executed agreement with respect to a
Disposition consummated in accordance with this Agreement, no Company shall,
directly or indirectly, enter into any agreement after the date hereof
prohibiting or restricting in any manner (directly or indirectly and including
by way of covenant, representation or warranty or event of default) the creation
or assumption of any Lien upon its Property, whether now owned or hereafter
acquired, except pursuant to the Credit Documents and the Subordinated Note
Documents and any Permitted Refinancing thereof.
9.08. Prohibition on Disqualified Capital Stock; Limitation on
--------------------------------------------------------
Indebtedness. No Company shall, directly or indirectly, issue or have
- ------------
outstanding, any Disqualified Capital Stock. No Company shall, directly or
indirectly, create, incur or suffer to exist or be or become liable for any
Indebtedness, except (each of which shall be given independent effect):
(a) Indebtedness under the Credit Documents;
(b) Indebtedness (other than the Subordinated Notes) outstanding on
the date hereof and listed in Schedule 9.08 and specified on Schedule 9.08
------------- -------------
as to remain outstanding after the Closing Date and any Permitted
Refinancing thereof;
(c) Indebtedness of Borrower or any Wholly Owned Subsidiary owing to
Borrower or any Qualified Subsidiary; provided, however, that (i) if
-------- -------
requested by the Majority Lenders, such Indebtedness shall be evidenced by
an Intercompany Note which shall be pledged to Administrative Agent on
behalf of the Lenders pursuant to the Security Agreement and (ii) such
Indebtedness shall not be held by any Person other than Borrower or a
Qualified Subsidiary and shall not be subordinate to any other Indebtedness
or other obligation of the obligor other than the Loans;
(d) Indebtedness of any Company secured by Liens permitted under
Section 9.07(g), (h), (i) or (l) not exceeding in the aggregate $2.0
million at any one time outstanding and any Permitted Refinancing thereof;
(e) Indebtedness arising from honoring a check, draft or similar
instrument against insufficient funds; provided, however, that such
-------- -------
Indebtedness is extinguished within two Business Days of its incurrence;
(f) obligations under operating leases permitted by Section 9.23 and
Contingent Obligations permitted by Section 9.25;
(g) unsecured Indebtedness of Borrower or any Qualified Subsidiary in
an aggregate principal amount not to exceed, together with Contingent
Obligations (without duplication) under Section 9.25(d), $2.0 million at
any time outstanding and any Permitted Refinancing thereof;
<PAGE>
-80-
(h) Indebtedness with respect to Capital Leases not exceeding in the
aggregate $2.0 million at any one time outstanding and any Permitted
Refinancing thereof;
(i) Indebtedness of Borrower represented by the Subordinated Notes in
an aggregate principal amount of $37.0 million less any prepayments or
repayments thereof and any Permitted Refinancing thereof; and
(j) the guarantee of the Obligations pursuant to Section 6 and
Subordinated Guarantees by Subsidiary Guarantors of the Subordinated Notes
pursuant to the Subordinated Note Documents as in effect on the Closing
Date.
All intercompany debt shall be unsecured and subordinate in right of
payment (to the same extent as the subordination provisions set forth in Exhibit
-------
B hereto) to the Obligations. Each Obligor, by its execution and delivery of
- -
this Agreement, hereby agrees to subordinate its right of payment under any
intercompany debt owed to it by Borrower or any Subsidiary to the full and
complete payment and performance of the Obligations. No Obligor shall incur any
Subordinated Debt unless such Subordinated Debt shall be subordinated to the
Obligations at least to the same extent and for so long as such Subordinated
Debt is subordinated to such other Indebtedness pursuant to documentation
reasonably acceptable to Joint Lead Arrangers.
9.09. Limitation on Investments. No Company shall, directly or
-------------------------
indirectly, make or permit to remain outstanding any Investments, except:
(a) operating deposit accounts and certificates of deposit with banks
in the ordinary course of business;
(b) Permitted Investments;
(c) Investments by any Company in any Qualified Subsidiary or in any
Subsidiary if as a result thereof or in connection therewith such
Subsidiary becomes a Qualified Subsidiary and Investments by any Subsidiary
in Borrower;
(d) Investments outstanding on the date hereof and identified with
particularity in SCHEDULE 9.09 and any renewals, extensions, modifications
and replacements thereof that do not increase the amount thereof;
(e) Investments that constitute Indebtedness permitted under Section
9.08 or Contingent Obligations permitted under Section 9.25;
(f) Investments by Borrower in Swap Contracts entered into as bona
----
fide hedges and not for speculative purposes;
----
(g) advances, loans or extensions of credit by any Company to
employees of any Company; provided, however, that the aggregate amount of
-------- -------
all such loans, advances and extensions of credit shall not at any time
exceed in the aggregate $1.0 million (without giving effect to any write-
down or write-off thereof);
(h) extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods or services in the
ordinary course of business;
<PAGE>
-81-
(i) pledges or deposits required in the ordinary course of business
in connection with workmen's compensation, unemployment insurance and other
social security or similar legislation;
(j) pledges or deposits in connection with (i) the non-delinquent
performance of bids, trade contracts (other than for borrowed money),
leases or statutory obligations, (ii) contingent obligations on surety or
appeal bonds, and (iii) other non-delinquent obligations of a like nature,
in each case incurred in the ordinary course of business;
(k) Investments made in order to consummate Acquisitions; provided,
--------
however, that (v) no Default or Event of Default exists or will result
-------
therefrom, (w) on a pro forma basis, after giving effect to such
--- -----
Acquisition(s), (A) Borrower would have been in compliance with Section
9.11 on the last day of the most recently completed fiscal quarter
(assuming, for purposes of Section 9.11, that such Acquisition had occurred
on the first day of the Measurement Period ending on such last day) as
evidenced in an Officers' Certificate delivered to Administrative Agent and
each Lender at least 10 days prior to the consummation of such Acquisition,
accompanied by supporting schedules and data in reasonable detail and (B)
Borrower can reasonably be expected to remain in compliance with such
covenants through the Final Maturity Date and to have sufficient cash
liquidity to conduct its business and pay its debts and other liabilities
as they come due; (x) the aggregate amount of the Acquisition Consideration
(which for each Acquisition shall be measured at the date of consummation
thereof) for all Acquisitions consummated since the Closing Date shall not
exceed $10.0 million and not more than $5.0 million in any fiscal year and
(y) such Acquisition shall be effected through Borrower or a Qualified
Subsidiary and the Person acquired shall be merged with or into a Qualified
Subsidiary or shall be at the time of consummation thereof a Qualified
Subsidiary;
(l) Investments (including debt obligations) received in connection
with the bankruptcy or reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other disputes with, customers
and suppliers arising in the ordinary course of business;
(m) any Company may hold additional Investments in any non-Wholly
Owned Subsidiary or Foreign Subsidiary to the extent that such Investments
reflect an increase in the stockholders' equity of such Subsidiary
resulting from retained earnings of such Subsidiary;
(n) any Foreign Subsidiary may make Investments in or to any other
Foreign Subsidiary;
(o) Capital Expenditures permitted by Section 9.11(d);
(p) Investments by any Company in any non-Wholly Owned Subsidiary or
any Subsidiary which is not an Obligor (including Foreign Subsidiaries) to
the extent made in the ordinary course to fund or support the ordinary
course operations of such Subsidiary so long as no Event of Default shall
have occurred and be continuing; provided, however, that (x) other than
-------- -------
with respect to any Subsidiary of which Borrower directly or indirectly
owns 80% of the outstanding Equity Interests, the amount of such
Investments made pursuant to this clause (p) shall not exceed $2.0 million
in the aggregate outstanding at any time (without giving effect to any
write-down or write-off thereof) and (y) upon the request of the Majority
Lenders all such Investments evidenced by Intercompany Notes shall be
pledged to Administrative Agent pursuant to the Security Agreement;
(q) Investments for the creation of any Wholly Owned Foreign
Subsidiary which is a foreign sales corporation consisting of de minimis
-- -------
capitalization;
<PAGE>
-82-
(r) any Company may hold the Equity Interests of any Subsidiary
existing on the Closing Date or created or acquired thereafter in
accordance with the provisions hereof and any additional Equity Interests
issued in exchange therefor or as a dividend thereon;
(s) Investments consisting of non-cash consideration received in the
form of securities, notes or similar obligations in connection with a
Disposition permitted by Section 9.06(j); provided, however, that (i) the
-------- -------
aggregate amount of such non-cash consideration received in connection with
any such Disposition, shall not exceed 10% of the total consideration
received in connection with such Disposition and (ii) such non-cash
consideration is pledged pursuant to the appropriate Security Document;
(t) Investments by Foreign Subsidiaries in high quality investments
of the type similar to Permitted Investments made outside the United
States; and
(u) in addition to the foregoing, other Investments not exceeding
$2.5 million in the aggregate outstanding at any time (without giving
effect to any write-downs or write-offs thereof), net of any returns of
capital, cash dividends and distributions received in respect thereof and
net cash proceeds of sales thereof.
9.10. Limitation on Dividend Payments. No Company shall, directly or
-------------------------------
indirectly, declare or make any Dividend Payment at any time, except (i) so long
as no Default or Event of Default shall have occurred and is continuing or would
arise therefrom Borrower may (1) pay cash dividends on the PIK Preferred to the
extent such dividend (a) accrues following the fifth anniversary of the Closing
Date, (b) does not accrue on a daily basis at a rate higher than 10% per annum,
and (c) is paid quarterly and (2) repurchase Common Stock of any employee
shareholder in the event of death, disability or Hardship; provided such
repurchases do not exceed $2.0 million in the aggregate since the Closing Date
and do not exceed $500,000 in any fiscal year and (ii) any Subsidiary may
declare and make Dividend Payments to the extent made pro rata to all holders of
--- ----
the capital stock thereof.
9.11. Financial Covenants.
-------------------
(a) Maximum Leverage Ratio. (i) Borrower shall not permit the
-----------------------
Leverage Ratio at the end of any Measurement Period ending during any period set
forth below to exceed the ratio set forth opposite such date below.
<TABLE>
<CAPTION>
======================================================================
PERIOD LEVERAGE RATIO
----------------------------------------------------------------------
<S> <C>
Closing Date to February 28, 1999 5.750:1.0
----------------------------------------------------------------------
March 1, 1999 to May 31, 1999 5.500:1.0
----------------------------------------------------------------------
June 1, 1999 to February 29, 2000 5.125:1.0
----------------------------------------------------------------------
March 1, 2000 to May 31, 2000 4.750:1.0
----------------------------------------------------------------------
June 1, 2000 to February 28, 2001 4.375:1.0
----------------------------------------------------------------------
March 1, 2001 to May 31, 2001 4.125:1.0
----------------------------------------------------------------------
June 1, 2001 to February 28, 2002 3.500:1.0
----------------------------------------------------------------------
March 1, 2002 to May 31, 2002 3.250:1.0
----------------------------------------------------------------------
</TABLE>
<PAGE>
-83-
<TABLE>
<S> <C>
======================================================================
June 1, 2002 and thereafter 3.000:1.0
======================================================================
</TABLE>
(ii) Borrower shall not permit the Senior Debt Leverage Ratio at the
end of any Measurement Period ending during any period set forth below to
exceed the ratio set forth opposite such date below.
<TABLE>
<CAPTION>
====================================================================
SENIOR DEBT
PERIOD LEVERAGE RATIO
--------------------------------------------------------------------
<S> <C>
Closing Date to February 28, 1999 3.625:1.0
--------------------------------------------------------------------
March 1, 1999 to May 31, 1999 3.500:1.0
--------------------------------------------------------------------
June 1, 1999 to February 29, 2000 3.125:1.0
--------------------------------------------------------------------
March 1, 2000 to May 31, 2000 3.000:1.0
--------------------------------------------------------------------
June 1, 2000 to February 28, 2001 2.750:1.0
--------------------------------------------------------------------
March 1, 2001 to May 31, 2001 2.500:1.0
--------------------------------------------------------------------
June 1, 2001 to February 28, 2002 2.225:1.0
--------------------------------------------------------------------
March 1, 2002 to May 31, 2002 2.125:1.0
====================================================================
</TABLE>
(b) Minimum Interest Coverage Ratio. Borrower shall not permit the
-------------------------------
Interest Coverage Ratio for any Measurement Period ending during any period set
forth below to be less than the ratio set forth opposite such date below.
<TABLE>
<CAPTION>
====================================================================
DATE INTEREST COVERAGE RATIO
--------------------------------------------------------------------
<S> <C>
Closing Date to February 28, 1999 1.900:1.0
--------------------------------------------------------------------
March 1, 1999 to February 29, 2000 2.000:1.0
--------------------------------------------------------------------
March 1, 2000 to February 28, 2001 2.250:1.0
--------------------------------------------------------------------
March 1, 2001 to August 31, 2001 2.500:1.0
--------------------------------------------------------------------
September 1, 2001 to February 28, 2002 2.750:1.0
--------------------------------------------------------------------
March 1, 2002 to August 31, 2002 3.000:1.0
--------------------------------------------------------------------
September 1, 2002 and thereafter 3.000:1.0
====================================================================
</TABLE>
(c) Minimum Fixed Charge Coverage Ratio. Borrower shall not
-----------------------------------
permit the ratio of (x) Consolidated EBITDA for any Measurement Period ending on
or after the Closing Date to (y) Consolidated Fixed Charges for the same
Measurement Period to be less than 1.1:1.0.
<PAGE>
-84-
(d) Capital Expenditures. (1) Borrower shall not permit the aggregate
--------------------
amount of Capital Expenditures made by the Companies to exceed $6.0 million
during fiscal 1999 of Borrower and any fiscal year thereafter; provided,
--------
however, that (x) if the aggregate amount of Capital Expenditures for any fiscal
- -------
year shall be less than the amount permitted for such fiscal year (before giving
effect to any carryover), then the shortfall may be added to the amount of
Capital Expenditures permitted for the immediately succeeding (but not any
other) fiscal year if the amount expended in such fiscal year would not exceed
125% of the amount permitted for such fiscal year (before any carryover) and (y)
in determining whether any amount is available for carryover, the amount
expended in any fiscal year shall first be deemed to be from the amount
allocated to such year before any carryover. No amount expended pursuant to
Section 9.11(d)(2) shall count against any amount permitted under Section
9.11(d)(1).
(2) Notwithstanding anything herein to the contrary, so long as no
Default or Event of Default shall have occurred and be continuing, the Companies
may make Capital Expenditures with the Net Available Proceeds of any Disposition
effected in accordance with Section 9.06(j) to the extent that such Net
Available Proceeds have not otherwise been expended by any Company.
(e) The covenants in clauses (a), (b) and (c) of this Section 9.11
shall be measured as of the end of each fiscal quarter, beginning with August
31, 1998 and will apply to Borrower and the Companies on a consolidated basis.
9.12. Pledge of Additional Collateral. Promptly, and in any
-------------------------------
event within 30 days, after the acquisition of any Property of the type that
would have constituted Collateral at the Closing Date (including the capital
stock of any Subsidiary hereafter created or acquired) other than Real Property
(the "Additional Collateral"), each Obligor and each Wholly Owned Subsidiary
---------------------
(other than any Foreign Subsidiary) shall take all action necessary, including
the execution and delivery of all such agreements, assignments, documents and
instruments (including amendments to the Credit Documents) and the filing of
appropriate financing statements under the provisions of the UCC or applicable
governmental requirements in each of the offices where such filing is necessary
or appropriate, to grant Administrative Agent for the benefit of the Lenders a
duly perfected first priority Lien on such Property pursuant to and to the full
extent required by the Security Documents and this Agreement; provided, however,
-------- -------
that not more than 65% of the capital stock of any Foreign Subsidiary (limited
to "first tier" Foreign Subsidiaries) need be pledged.
In the event that, after the Closing Date, any Obligor acquires or
holds an interest in any Real Property with a market or book value of $2.5
million or more, the Obligors and each Wholly Owned Subsidiary (other than a
Foreign Subsidiary) shall (i) take such actions and execute such documents as
Administrative Agent shall reasonably require to confirm the Lien of an existing
Mortgage, if applicable, or to create a new Mortgage on such additional Real
Property and (ii) cause to be delivered to Administrative Agent, on behalf of
the Lenders, the documents and instruments reasonably requested by
Administrative Agent, including, without limitation, the items set forth in
Sections 7.01(ii)(3)(ii) and 7.01(vii).
The costs of all actions reasonably taken by the parties in connection
with the pledge of Additional Collateral or in connection with any Mortgage,
including reasonable costs of counsel for Administrative Agent, shall be paid by
the Obligors promptly following written demand.
9.13. Security Interests. (a) Each Obligor shall, promptly, upon the
------------------
reasonable request of Administrative Agent or any Lender, at Borrower's expense,
execute, acknowledge and deliver, or cause the execution, acknowledgment and
delivery of, and thereafter register, file or record, or cause to be registered,
filed or recorded, in an appropriate governmental office, any document or
instrument supplemental to or confirmatory
<PAGE>
-85-
of the Security Documents or otherwise deemed by Administrative Agent necessary
or desirable for the continued validity, perfection and priority of the Liens on
the Collateral covered thereby.
(b) Each Obligor shall deliver or cause to be delivered to
Administrative Agent from time to time such other documentation, consents,
authorizations, approvals and orders in form and substance reasonably
satisfactory to Administrative Agent as Administrative Agent shall reasonably
deem necessary to perfect or maintain the Liens on the Collateral.
9.14. Compliance with Environmental Laws. (a) Each Company shall
----------------------------------
comply with all Environmental Laws, and will keep or cause all Real Property to
be kept free of any Liens under Environmental Laws, unless failure to do so
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect; (b) in the event of the presence of any Hazardous
Material at, on or under any Real Property which would reasonably be expected to
result in liability under or a violation of any Environmental Law, in each case
which would, either individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect, each Company shall undertake, and/or cause any
of their respective tenants or occupants to undertake, at their sole expense,
any action required pursuant to Environmental Laws to mitigate and eliminate any
such adverse effect; provided, however, that no Company shall be required to
-------- -------
comply with any order or directive which is being contested in good faith and by
proper proceedings so long as it has maintained adequate reserves with respect
to such compliance to the extent required in accordance with GAAP; (c) each
Company shall promptly notify Administrative Agent of the occurrence of any
event specified in clause (b) of this Section 9.14 and shall periodically
thereafter keep Administrative Agent informed of any material actions taken in
response to such event and the results of such actions; and (d) at the written
request of Administrative Agent at any time and from time to time, each Company
will provide, at Borrower's sole cost and expense, an environmental site
assessment (including, without limitation, the results of any subsurface
testing, conducted if Administrative Agent directs that such testing be
conducted) concerning any Real Property now or hereafter owned, leased or
operated by any Company, conducted by an environmental consulting firm proposed
by Borrower and approved by Administrative Agent, (such approval not to be
unreasonably withheld), indicating the presence or absence of Hazardous
Materials and the potential cost of any required investigation, removal or
remedial action in connection with any Hazardous Materials on such Real
Property; provided, however, that such request may be made only if (a) there has
-------- -------
occurred and is continuing an Event of Default, (b) Administrative Agent
reasonably believes that any Company or any such Real Property is not in
material compliance with Environmental Law or (c) circumstances exist that
reasonably could be expected to form the basis of an Environmental Claim against
any Company or any such Real Property which could materially and adversely
affect any Company. If any Company fails to provide the same within 60 days
after such request was made, Administrative Agent may (but is under no
obligation to) order the same, and each Company shall grant and hereby grants to
Administrative Agent and its agents access to such Real Property and
specifically grants Administrative Agent an irrevocable non-exclusive license,
subject to the rights of tenants, to undertake such an assessment, all at
Borrower's sole cost and expense.
9.15. Limitation on Lines of Business. No Company shall directly or
-------------------------------
indirectly, engage to any substantial extent in any line or lines of business
activity other than the business of the type conducted by the Companies as of
the Closing Date.
9.16. Limitation on Transactions with Affiliates. No Company shall,
------------------------------------------
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
Property, the rendering of any service, or a merger or consolidation), with any
Affiliate (an "Affiliate Transaction") unless such Affiliate Transaction is
---------------------
otherwise not prohibited under this Agreement, is in the ordinary course of such
Company's business and is on fair and reasonable terms that are not less
favorable to such Company than those that would be obtainable at the time in an
arm's-length transaction with a Person who is not
<PAGE>
-86-
such an Affiliate; provided, however, that the following shall in any event be
-------- -------
permitted: (a) Dividend Payments permitted by Section 9.10; (b) the payment of
reasonable fees to directors of any Company who are not employees of any
Company; (c) any transaction with an officer or member of the board of directors
of any Company in the ordinary course of business involving compensation,
indemnity, employee benefit arrangements or expense reimbursement; (d) loans or
advances to employees permitted by Section 9.09; (e) transactions and agreements
in existence on the date hereof and listed and described with particularity in
Schedule 9.16 (the "Existing Affiliate Agreements") and the transactions
- ------------- -----------------------------
contemplated by each of the Existing Affiliate Agreements; (f) employment
agreements and arrangements (including, without limitation, benefits) approved
by the board of directors of Borrower or committee thereof; and (g) any employee
benefit plan available to employees of Borrower generally.
9.17. Limitation on Accounting Changes; Limitation on Investment
----------------------------------------------------------
Company Status. No Company shall make or permit, any change in (i) accounting
- --------------
policies or reporting practices, except immaterial changes and except as
required by generally accepted accounting principles or (ii) its fiscal year end
(the Saturday closest to August 31 of each year). No Company shall be or become
an investment company subject to the registration requirements under the
Investment Company Act of 1940, as amended
9.18. Interest Rate Protection Agreements. Borrower shall obtain, on
-----------------------------------
or within 90 days after the Closing Date, interest rate protection agreements
having terms and with counterparties reasonably satisfactory to the Joint Lead
Arrangers as shall result in effectively limiting the interest cost to the
Borrower of at least 50% of the aggregate principal amount of the then
outstanding Total Debt of the Borrower for a period of at least three years from
the date the initial interest rate protections agreements were made.
9.19. Limitation on Modifications of Certain Documents, Etc. No
------------------------------------------------------
Company shall, directly or indirectly, consent to any modification, supplement
or waiver of, or amend or modify, any of the provisions of, in any manner which
could reasonably be expected to be materially adverse to the Lenders, its
certificate of incorporation or its by-laws (or any other organizational
document), or any agreement entered into with respect to its Equity Interests.
No material change may be made to the Merger Agreement without the consent of
Agents and the Majority Lenders.
9.20. Limitation on Payments or Prepayments of Indebtedness or
-------------------------------------------------------
Preferred Stock, Etc. No Company shall, directly or indirectly:
- ---------------------
(a) make any payment or prepayment (optional or otherwise) on or
redemption of or any payments in redemption, defeasance or repurchase of
(A) any Indebtedness (other than the Loans), including Subordinated Notes
(whether in cash, securities or Property) or (B) the PIK Preferred, except
(1) regularly scheduled mandatory payments of interest, but only to the
extent permitted under the subordination provisions, if any, applicable
thereto, (2) pursuant to any Permitted Refinancing and (3) the conversion
or exchange of any Indebtedness into shares of Qualified Capital Stock of
Borrower;
(b) amend, supplement, waive or otherwise modify any of the
provisions of any Subordinated Note Documents or the PIK Preferred
Documents:
(i) in the case of Subordinated Note Documents, which
amends or modifies any subordination provisions contained therein;
(ii) which shortens the fixed maturity, or increases the
rate or shortens the time of pay
<PAGE>
-87-
ment of interest or dividends on, or increases the amount or shortens
the time of payment of any principal, liquidation preference or
premium payable whether at maturity, at a date fixed for prepayment or
by acceleration or otherwise of such Indebtedness, or increases the
amount of, or accelerates the time of payment of, any fees payable in
connection therewith or alters in any way the right of Borrower to pay
dividends in kind on the PIK Preferred;
(iii) which relates to the affirmative or negative
covenants, events of default or remedies under the documents or
instruments evidencing such Indebtedness on Preferred Stock and the
effect of which is to subject any Company to any more onerous or more
restrictive provisions; or
(iv) which otherwise adversely affects the interests of the
Lenders as senior creditors or the interests of the Lenders under this
Agreement or any other Credit Document in any respect; or
(c) make any payment in cash on any equity or debt security that may
be made under the terms thereof by the issuance of any security of the same
nature.
9.21. Limitation on Certain Restrictions Affecting Subsidiaries. No
---------------------------------------------------------
Company shall, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any direct or indirect encumbrance or restriction on
the ability of any Subsidiary to (a) pay dividends or make any other
distributions on such Subsidiary's Equity Interests or any other interest or
participation in its profits owned by any Company, or pay any Indebtedness or
any other obligation owed to any Company, (b) make Investments in or to any
Company, or (c) transfer any of its Property to any Company, except for such
encumbrances or restrictions existing under or by reason of (i) applicable law,
(ii) the Credit Documents, (iii) such restrictions with respect to the transfer
of those assets subject to a Lien permitted under Section 9.07, (iv) customary
provisions restricting subletting or assignment of any lease governing a
leasehold interest of any Company, (v) with respect to restrictions described in
clause (c) only, restrictions in any agreement relating to any Disposition which
is permitted under this Agreement, and (vi) the Subordinated Note Documents as
in effect on the date hereof and any Permitted Refinancing thereof so long as
such restriction in such refinancing is not more disadvantageous to the Lenders
or any Company than the Subordinated Note Documents as in effect on the Closing
Date.
9.22. Additional Obligors. Upon any Company creating or acquiring a
-------------------
Wholly Owned Subsidiary (other than a Foreign Subsidiary) after the date hereof
(each such Subsidiary referred to herein as an "Additional Obligor" and
------------------
collectively as the "Additional Obligors"), Borrower shall (i) cause such
-------------------
Subsidiary to execute and deliver all such agreements, guarantees, documents and
certificates (including any amendments to the Credit Documents and a Joinder
Agreement substantially in the form of Exhibit L) as Administrative Agent may
---------
reasonably request and do such other acts and things as Administrative Agent may
reasonably request in order to have such Subsidiary guarantee the Obligations in
accordance with the terms of the Credit Documents, (ii) promptly (I) execute and
deliver to Administrative Agent such amendments to the Security Documents as
Administrative Agent deems necessary or advisable in order to grant to
Administrative Agent, for the benefit of the Lenders, a perfected first priority
security interest in the Equity Interests and debt securities of such new
Subsidiary which are owned by any Company and required to be pledged pursuant to
the Security Agreement, (II) deliver to Administrative Agent the certificates
representing such capital stock and debt securities, together with (A) in the
case of such Equity Interests, undated stock powers endorsed in blank, and (B)
in the case of such debt securities, endorsed in blank, in each case executed
and delivered by a responsible officer of such Company, as the case may be,
(III) cause such new Subsidiary to take such actions necessary or advisable to
grant to Administrative Agent for the benefit of the Lenders a perfected first
priority security interest in the collateral described in the Security Agreement
with respect to such new Subsidiary, including, without limitation,
<PAGE>
-88-
the filing of Uniform Commercial Code financing statements in such jurisdictions
as may be required by the Security Agreement or by law or as may be reasonably
requested by Administrative Agent and (IV) if reasonably requested by
Administrative Agent, deliver to Administrative Agent legal opinions relating to
the matters described above, which opinion shall be in form and substance, and
from counsel, reasonably satisfactory to Administrative Agent; provided,
--------
however, that notwithstanding the foregoing, only 65% of the voting Equity
- -------
Interests of any direct foreign Subsidiary of Borrower or any domestic
Subsidiary need be pledged under this Section 9.22, no voting Equity Interests
of any foreign Subsidiary of any other foreign Subsidiary need be pledged under
this Section 9.22 and no direct or indirect foreign Subsidiary shall become a
Guarantor hereunder or shall be required to pledge any of its assets.
9.23. Restriction on Leases. No Company shall, become liable in any
---------------------
way, whether, directly or by assignment or as a guarantor or other surety, for
the obligations of the lessee under any operating lease, unless, immediately
after giving effect to the incurrence of liability with respect to such lease,
the Consolidated Rental Payments of the Companies at the time in effect shall
not exceed $5.0 million per annum.
--- -----
9.24. Limitation on Sale or Discount of Receivables. No Company shall,
---------------------------------------------
directly or indirectly, sell, with or without recourse, or discount, or
otherwise sell for less than the face value thereof, notes or accounts
receivables, other than in connection with trade discounts in the ordinary
course of business or consistent with past practice and other than as permitted
by Section 9.06(h) or (i).
9.25. Limitation on Contingent Obligations No Company shall, directly
------------------------------------
or indirectly, create or become or be liable with respect to any Contingent
Obligation, except:
(a) pursuant to Section 6 and any subordinated guarantee of the
Subordinated Notes by Subsidiary Guarantors pursuant to the Subordinated
Note Documents as in effect on the Closing Date;
(b) Contingent Obligations in respect of operating leases to the
extent permitted under Section 9.23;
(c) Contingent Obligations of any Company in respect of Indebtedness
or other liabilities of Borrower or any Qualified Subsidiary to the extent
that the existence of such Indebtedness or other liabilities is not
prohibited under this Agreement;
(d) other Contingent Obligations which, together with the amount of
Indebtedness incurred under Section 9.08(g) (but without duplication), does
not exceed $2.0 million in the aggregate at any time outstanding;
(e) endorsements for collection or deposit in the ordinary course of
business;
(f) Contingent Obligations of any Company existing as of the Closing
Date and listed in Schedule 8.02 and renewals, extensions, modifications
-------------
and replacements thereof that do not increase the amount thereof or provide
for terms materially less favorable to any Company;
(g) Swap Contracts entered into in the ordinary course of business and
designed to protect the Obligors against fluctuations in interest rates,
currency exchange rates, commodity prices or similar risks; and
<PAGE>
-89-
(h) Contingent Obligations in connection with Dispositions permitted
under Section 9.06, arising in connection with indemnification and other
agreements in respect of any contract relating to such Disposition, not to
exceed the consideration received by any Company in connection with such
sale and excluding in all cases any Contingent Obligation with respect to
any obligation of any third person incurred in connection with the
acquisition of the Property which is the subject of such Disposition.
9.26. Landlord Lien Assurances. Borrower shall use its best efforts to
------------------------
obtain for Real Property leases entered into after the Closing Date,
simultaneously with the execution of the lease relating to such property,
agreements substantially in the form of Exhibit K from each of the respective
---------
landlords of such of the Real Property as is being leased by Borrower or any
other Obligor confirming that such landlords have subordinated their landlord
liens in Property of such Obligor maintained on such Real Property to the
security interests held by Administrative Agent pursuant to the Security
Agreement and that such landlords will provide Administrative Agent with access
to such Real Property to exercise Administrative Agent's remedies pursuant to
the Security Agreement.
9.27. Limitation on Other Restrictions on Amendment of Credit
-------------------------------------------------------
Documents. No Company will, directly or indirectly, enter into, suffer to exist
- ---------
or become or remain subject to any agreement or instrument, except for the
Credit Documents, that would prohibit or restrict (including by way of a
covenant, representation or warranty or event of default), or require the
consent of any Person to, any amendment to, or waiver or consent to departure
from the terms of, any of the Credit Documents.
9.28. Limitation on Subsidiaries. Borrower will not create any
--------------------------
Subsidiary without the prior written consent of Joint Lead Arrangers, which
consent shall not be unreasonably withheld; provided, however, that the
-------- -------
provisions of this Section 9.28 shall not require Joint Lead Arrangers' consent
for the formation of wholly-owned direct and indirect Subsidiaries of Borrower.
9.29. Limitation on Designated Senior Indebtedness. No Company shall
--------------------------------------------
designate or permit the designation of any Indebtedness (other than the
Obligations) as "Designated Senior Indebtedness" or "Designated Guarantor Senior
Indebtedness" for purposes of, and as defined in, the Subordinated Note
Documents.
9.30. Limitation on Change of Principal Place of Business or Corporate
----------------------------------------------------------------
Name. Each Obligor shall not change its principal place of business or its
- ----
corporate name unless it shall have (a) given Administrative Agent at least
thirty days' advance written notice of such change, and (b) filed in all
necessary jurisdictions such documents as may be necessary to continue without
impairment or interruption the perfection and priority of the liens on the
Collateral in favor of Administrative Agent pursuant to the Security Documents.
9.31. Changes in Factual Information Regarding the Collateral. Each
-------------------------------------------------------
Obligor will furnish to the Administrative Agent prompt written notice of any
change (i) in any Obligor's corporate name or in any trade name used to identify
it in the conduct of its business or in the ownership of its properties , (ii)
in the location of any Obligor's chief executive office, its principal place of
business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by it
is located (including the establishment of any such new office or facility),
(iii) in any Obligor's identity or corporate structure, (iv) resulting in any
tangible Collateral being located in any jurisdiction in which a financing
statement must be, but has not been, filed in order to perfect the
Administrative Agent's Liens, (v) in respect of any patents, trademarks
copyrights or applications therefor owned by or licensed to any Obligor, or (vi)
in any Obligor's Federal Taxpayer Identification Number. Each Company will not
effect or permit any change referred to in the preceding sentence unless all
filings have been made under the Uniform Commercial Code or otherwise
<PAGE>
-90-
that are required in order for the Administrative Agent to continue at all times
following such change to have a valid, legal and perfected security interest in
all the Collateral and will promptly notify the Administrative Agent if any
material portion of the Collateral is damaged or destroyed.
9.32. Casualty and Condemnation. Each Company will furnish to
-------------------------
Administrative Agent prompt written notice of any casualty or other insured
damage to any material portion of any Collateral or the commencement of any
action or proceeding for the taking of any material portion of the Collateral or
any part thereof or interest therein under power of eminent domain or by
condemnation or similar proceeding.
9.33. Take or Pay Contracts. No Company shall or enter into or be a
---------------------
party to any arrangement for the purchase of materials, supplies, other property
or services if such arrangement by its express terms requires that payment be
made by such Company regardless of whether such materials, supplies, other
property or services are delivered or furnished to it.
9.34. Tax Sharing Arrangements. No Company shall enter into or permit
------------------------
to exist any tax sharing agreement or similar arrangement unless the same shall
have been reviewed by, and consented to by, Joint Lead Arrangers, which consent
shall not be unreasonably withheld.
9.35. Year 2000 Compliance. Each Company will, on or prior to
--------------------
September 30, 1999, eliminate any significant risks that computer hardware,
software or any equipment containing embedded microchips used in their business
or operations will not in the case of dates or time periods occurring after
December 31, 1999 function, in the receipt, transmission, processing,
manipulation, storage, retrieval, retransmission or other utilization of data,
at least as effectively as in the case of dates or time periods occurring prior
to January 1, 2000, in any respect that would cause a Material Adverse Effect.
Section 10. Events of Default. If one or more of the following events
-----------------
(herein called "Events of Default") shall occur and be continuing:
-----------------
(a) (i) Borrower shall default in the payment when due (whether at
stated maturity upon prepayment or repayment or acceleration or otherwise)
of any principal of any Loan or any Reimbursement Obligation, or (ii)
Borrower shall default in the payment when due of interest on any Loan or
any fee or any other amount payable by it hereunder or under any other
Credit Document when due and such default under this clause (ii) shall have
continued unremedied for five or more Business Days; or
(b) any Company shall default in the payment when due of any principal
of or interest on any of its Indebtedness (other than the Loans)
aggregating $1.0 million or more, beyond the period of grace, if any,
provided in the instrument or agreement under which such Indebtedness was
created, after giving effect to any consents or waivers relating thereto
obtained before the expiration of any such period of grace; or any event
specified in any note, agreement, indenture or other document evidencing or
relating to any Indebtedness aggregating $1.0 million or more if the effect
of such event (after giving effect to any consents or waivers relating
thereto obtained before the expiration of any such period of grace) is to
cause, or (with the giving of any notice or the lapse of time or both) to
permit the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause, such Indebtedness to become
due, or to be prepaid in full (whether by redemption, purchase, offer to
purchase or otherwise), prior to its stated maturity; or any Company shall
default in the payment when due of any amount aggregating $500,000 or more
under any Swap Contract; or any event specified in any Swap Contract shall
occur if the effect of such event is to cause, or (with the giving of
notice or the
<PAGE>
-91-
lapse of time or both) to permit, termination or liquidation payments
aggregating $500,000 or more to become due; or
(c) Any representation or warranty made or deemed made in any Credit
Document (or in any modification or supplement thereto) by any Company, or
in any certificate furnished to any Creditor pursuant to the provisions
thereof, shall prove to have been false or misleading as of the time made,
deemed made or furnished in any material respect; or
(d) Any Obligor shall default in the performance of any of its
obligations under any of Sections 9.01(g) or 9.05 through 9.35; or any
Obligor shall default in the performance of any of its obligations under
Section 5.02 of the Security Agreement; or Borrower shall default in the
performance of its obligations under Section 9.01(e) and such default shall
continue unremedied for five Business Days; or any Obligor shall default in
the performance of any of its other obligations in this Agreement, the
Security Documents or the Letter of Credit Documents and such default shall
continue unremedied for a period of thirty days after written notice
thereof to such Obligor or Borrower by Administrative Agent; or
(e) Any Company shall not, or shall admit in writing its inability to,
or be generally unable to, pay its debts as such debts become due; or
(f) Any Company shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its Property, (ii)
make a general assignment for the benefit of its creditors, (iii) commence
a voluntary case under the Bankruptcy Code (as now or hereafter in effect),
(iv) file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
readjustment of debts, (v) fail to controvert within 60 days or in a timely
and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Bankruptcy Code, or (vi) take
any corporate action for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application
or consent of the affected Company, in any court of competent jurisdiction,
seeking (i) its liquidation, reorganization, dissolution or winding-up, or
the composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of such Company or of
all or any substantial part of its assets, or (iii) similar relief in
respect of such Company under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and
either (1) such proceeding shall not be actively contested by such Company,
or (2) such proceeding or case shall continue undismissed, undischarged or
unbonded, or an order, judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in effect, for a
period of 60 or more days; or an order for relief against any Company shall
be entered in an involuntary case under the Bankruptcy Code; or
(h) A final judgment or judgments for the payment of money in excess
of $1.0 million in the aggregate (exclusive of judgment amounts to the
extent covered by insurance) shall be rendered by one or more courts,
administrative tribunals or other bodies having jurisdiction against any
Company and the same shall not be discharged (or provision shall not be
made for such discharge), vacated or bonded pending appeal, or a stay of
execution thereof shall not be procured, within 45 days from the date of
entry thereof and such Company shall not, within said period of 45 days, or
such longer period during which execution of the same shall have been
stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal; or
<PAGE>
-92-
(i) Any member of the ERISA Group shall fail to pay when due an amount
or amounts aggregating in excess of $1.0 million which it shall have become
liable to pay under Title IV of ERISA; or notice of intent to terminate a
Material Plan shall be filed under Title IV of ERISA by any member of the
ERISA Group, any plan administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of ERISA to terminate,
to impose liability (other than for premiums under Section 4007 of ERISA)
in respect of, or to cause a trustee to be appointed to administer any
Material Plan; or a condition shall exist by reason of which the PBGC would
be entitled to obtain a decree adjudicating that any Material Plan must be
terminated; or there shall occur a complete or partial withdrawal from, or
a default, within the meaning of Section 4219(c)(5) of ERISA, with respect
to, one or more Multiemployer Plans which could reasonably be expected to
cause one or more members of the ERISA Group to incur a payment obligation
in excess of $1.0 million; or
(j) Any Change of Control shall occur; or
(k) Any Security Document after delivery thereof at any time shall
cease (other than pursuant to its terms) to be in full force and effect or
shall for any reason fail to create or cease to maintain a valid and duly
perfected first priority security interest in and Lien upon (subject to
Prior Liens) any portion of the Collateral, except for (A) released
Collateral or (B) any Collateral in which a security interest may not be
perfected by the filing of UCC financing statements or by possession of
such Collateral and possession of such Collateral by Administrative Agent
is not required by the Security Documents or this Agreement or any Obligor
or any other party shall at any time directly or indirectly contest the
validity or enforceability of any Security Document; or
(l) Any Guarantee ceases to be in full force and effect (other than
pursuant to its terms) or any of the Subsidiary Guarantors repudiates, or
attempts to repudiate, any of its obligations under any of the Guarantees;
or
(m) The subordination provisions relating to any Subordinated Note
Document (the "Subordination Provisions") shall fail to be enforceable by
------------------------
the Lenders (which have not effectively waived the benefits thereof) in
accordance with the terms thereof, or any Obligation shall fail to
constitute "Senior Debt" or "Guarantor Senior Debt" (as defined in the
Subordinated Note Documents), or any Company or Subordinated Lender shall,
directly or indirectly, disavow or contest in any manner any of the
Subordination Provisions;
THEREUPON: (1) in the case of an Event of Default (other than one referred to in
clause (f) or (g) of this Section 10 with respect to Borrower), Administrative
Agent may, and upon written direction of the Majority Lenders shall, by notice
to Borrower, terminate the Commitments and/or declare the principal amount then
outstanding of, and the accrued interest on, the Loans, the Reimbursement
Obligations and all other amounts payable by Borrower hereunder and under the
Notes (including any amounts payable under Section 5.05 or 5.06) to be forthwith
due and payable, whereupon such amounts shall be immediately due and payable
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by Borrower, reduce any claim to judgment,
take any other action permitted by law and/or take any action permitted to be
taken by the Security Documents during the existence of an Event of Default; and
(2) in the case of the occurrence of an Event of Default referred to in clause
(f) or (g) of this Section 10 with respect to Borrower, the Commitments shall
automatically be terminated and the principal amount then outstanding of, and
the accrued interest on, the Loans, the Reimbursement Obligations and all other
amounts payable by Borrower hereunder and under the Notes (including any amounts
payable under Section 5.05 or 5.06) shall automatically become immediately due
<PAGE>
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and payable without presentment, demand, protest or other formalities of any
kind, all of which are hereby expressly waived by Borrower.
In addition, Borrower agrees, upon the occurrence and during the
continuance of any Event of Default if Administrative Agent has declared the
principal amount then outstanding of, and accrued interest on, the Revolving
Credit Loans, and all other amounts payable to the Revolving Credit Lenders
hereunder and under the Notes evidencing such Loans to be due and payable, it
may and shall, if requested by the Majority Revolving Credit Lenders through
Administrative Agent (and, in the case of any Event of Default referred to in
clause (f) or (g) of this Section 10 with respect to any Company, forthwith,
without any demand or the taking of any other action by Administrative Agent or
such Lenders) provide cover for the Letter of Credit Liabilities by paying to
Administrative Agent immediately available funds in an amount equal to the then
aggregate undrawn face amount of all Letters of Credit, which funds shall be
held by Administrative Agent in the Collateral Account as collateral security in
the first instance for the Letter of Credit Liabilities and be subject to
withdrawal only as provided in the Security Agreement.
Section 11. Administrative Agent.
--------------------
11.01. General Provisions. Each of the Lenders, the Issuing Lender
------------------
and Joint Lead Arrangers hereby irrevocably appoints Administrative Agent as its
agent and authorizes Administrative Agent to take such actions on its behalf and
to exercise such powers as are delegated to Administrative Agent by the terms
hereof and the Security Documents, together with such actions and powers as are
reasonably incidental thereto.
The Lender or other financial institution serving as any Agent or
Issuing Lender hereunder shall have the same rights and powers in its capacity
as a Lender as any other Lender and may exercise the same as though it were not
such Agent or Issuing Lender, and such bank and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
any Company or other Affiliate thereof as if it were not such Agent or Issuing
Lender hereunder.
No Agent or Issuing Lender shall have any duties or obligations except
those expressly set forth herein. Without limiting the generality of the
foregoing, (a) no Agent or Issuing Lender shall be subject to any fiduciary or
other implied duties, regardless of whether a Default or Event of Default has
occurred and is continuing, (b) no Agent or Issuing Lender shall have any duty
to take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated hereby that such Agent or
Issuing Lender is required to exercise in writing by the Majority Lenders (or
such other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 12.04), and (c) except as expressly set
forth herein, no Agent or Issuing Lender shall have any duty to disclose, and
shall not be liable for the failure to disclose, any information relating to any
Company that is communicated to or obtained by the financial institution serving
as such Agent or Issuing Lender or any of its Affiliates in any capacity. No
Agent or Issuing Lender shall be liable for any action taken or not taken by it
with the consent or at the request of the Majority Lenders (or such other number
or percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 12.04) or in the absence of its own gross negligence or
willful misconduct. No Agent shall be deemed to have knowledge of any Default or
Event of Default unless and until written notice thereof is given to
Administrative Agent and such Agent by Borrower or a Lender, and no Agent or
Issuing Lender shall be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection with
this Agreement or any other Credit Document, (ii) the contents of any
certificate, report or other document delivered hereunder or under any other
Credit Document or in connection herewith, (iii) the performance or observance
of any of the covenants, agreements or other terms or conditions set forth
herein, (iv) the validity, enforceability, effectiveness or genuineness of this
Agreement or any other
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Credit Document or any other agreement, instrument or document, or (v) except as
expressly set forth therein the satisfaction of any condition set forth in
Section 7 or elsewhere herein, other than to confirm receipt of items expressly
required to be delivered to such Agent.
Each Agent and Issuing Lender shall be entitled to rely upon, and
shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing believed
by it to be genuine and to have been signed or sent by the proper Person. Each
Agent and Issuing Lender also may rely upon any statement made to it orally or
by telephone and believed by it to be made by the proper Person, and shall not
incur any liability for relying thereon. Each Agent and Issuing Lender may
consult with legal counsel (who may be counsel for Borrower), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.
Each Agent and Issuing Lender may perform any and all its duties and
exercise its rights and powers by or through any one or more sub-agents
appointed by such Agent or Issuing Lender with reasonable care. Each Agent,
Issuing Lender and any such sub-agent may perform any and all its duties and
exercise its rights and powers through their respective Affiliates, directors,
officers, employees, agents and advisors ("Related Parties"). The exculpatory
---------------
provisions of the preceding paragraphs shall apply to any such sub-agent and to
the Related Parties of each Agent and Issuing Lender and any such sub-agent, and
shall apply to their respective activities in connection with the syndication of
the credit facilities provided for herein as well as activities as such Agent or
Issuing Lender.
Subject to the appointment and acceptance of a successor Agent as
provided in this paragraph, any Agent may resign at any time by notifying the
Lenders, the Issuing Lender (with respect to Administrative Agent only) and
Borrower. Upon any such resignation, the Majority Lenders shall have the right,
in consultation with Borrower, to appoint a successor. If no successor shall
have been so appointed by the Majority Lenders and shall have accepted such
appointment within 30 days after the retiring Agent gives notice of its
resignation, then the retiring Agent may, on behalf of the Lenders and the
Issuing Lender and, so long as no Default or Event of Default shall have
occurred and be continuing, subject to Borrower's consent (not to be
unreasonably withheld), appoint a successor Agent which shall be a bank with an
office in New York, New York, or an Affiliate of any such bank. Upon the
acceptance of its appointment as Agent hereunder by a successor, such successor
shall succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Agent, and the retiring Agent shall be discharged from
its duties and obligations hereunder. The fees payable by Borrower to a
successor Agent shall be the same as those payable to its predecessor unless
otherwise agreed between Borrower and such successor. After the Agent's
resignation hereunder, the provisions of this Section 11 shall continue in
effect for the benefit of such retiring Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while it was acting as such Agent.
Each Lender acknowledges that it has, independently and without
reliance upon any Agent, Issuing Lender or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon any Agent,
Issuing Lender or any other Lender and based on such documents and information
as it shall from time to time deem appropriate, continue to make its own
decisions in taking or not taking action under or based upon this Agreement, any
related agreement or any document furnished hereunder or thereunder. No Agent or
Issuing Lender shall be deemed a trustee or other fiduciary on behalf of any
party.
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11.02. Indemnification. Each Lender agrees to indemnify and hold
---------------
harmless each Agent and each Revolving Credit Lender agrees to indemnify and
hold harmless the Issuing Lender (to the extent not promptly reimbursed under
Section 12.03, but without limiting the obligations of Borrower under Section
12.03), ratably in accordance with the aggregate principal amount of the
respective Commitments of and/or Loans and Reimbursement Obligations held by
such Lenders (or, if all of the Commitments shall have been terminated or
expired, ratably in accordance with the aggregate outstanding amount of the
Loans and Reimbursement Obligations held by the Lenders), for any and all
liabilities (including pursuant to any Environmental Law), obligations, losses,
damages, penalties, actions, judgments, deficiencies, suits, costs, expenses
(including reasonable attorney's fees) or disbursements of any kind and nature
whatsoever that may be imposed on, incurred by or asserted against such Agent or
Issuing Lender (including by any Lender) arising out of or by reason of any
investigation in or in any way relating to or arising out of any Credit Document
or any other documents contemplated by or referred to therein for any action
taken or omitted to be taken by such Agent or Issuing Lender under or in respect
of any of the Credit Documents or other such documents or the transactions
contemplated thereby (including the costs and expenses that Borrower is
obligated to pay under Section 12.03, and including also any payments under any
indemnity that Administrative Agent is required to issue to any Lender referred
to in Section 4.01(c) of the Security Agreement, or to any bank referred to in
Section 4.02 of the Security Agreement to which remittances in respect of
Accounts, as defined therein, are to be made, but excluding, unless a Default
has occurred and is continuing, normal administrative costs and expenses
incident to the performance of its agency duties hereunder) or the enforcement
of any of the terms hereof or thereof or of any such other documents; provided,
--------
however, that no Lender shall be liable for any of the foregoing to the extent
- -------
they are determined by a court of competent jurisdiction in a final and
nonappealable judgment to have resulted from the gross negligence or willful
misconduct of the party to be indemnified. The agreements set forth in this
Section 11.02 shall survive the payment of all Loans and other obligations
hereunder and shall be in addition to and not in lieu of any other
indemnification agreements contained in any other Credit Document.
11.03. Consents Under Other Credit Documents. Except as otherwise
-------------------------------------
provided in this Agreement and the other Credit Documents, Administrative Agent
may, with the prior consent of the Majority Lenders (but not otherwise), consent
to any modification, supplement or waiver under any of the other Credit
Documents.
11.04. Collateral Sub-Agents. Each Lender by its execution and
---------------------
delivery of this Agreement agrees, as contemplated by Section 4.03 of the
Security Agreement, that, in the event it shall hold any Permitted Investments
referred to therein, such Permitted Investments shall be held in the name and
under the control of such Lender, and such Lender shall hold such Permitted
Investments as a collateral sub-agent for Administrative Agent thereunder.
Borrower by its execution and delivery of this Agreement hereby consents to the
foregoing.
Section 12. Miscellaneous.
-------------
12.01. Waiver. No failure on the part of any Creditor to exercise
------
and no delay in exercising, and no course of dealing with respect to, any right,
power or privilege under any Credit Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or privilege under
any Credit Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The remedies provided herein
are cumulative and not exclusive of any remedies provided by law.
12.02. Notices. All notices, requests and other communications
-------
provided for herein and under the Security Documents (including any
modifications of, or waivers, requests or consents under, this Agreement) shall
be given or made in writing (including by facsimile) delivered to the intended
recipient at the "Address for Notices" specified below its name on the signature
pages hereof; or, as to any party, at such other address as
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shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by facsimile or personally delivered or,
in the case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
12.03. Expenses, Indemnification, Etc. (a) The Obligors, jointly and
------------------------------
severally, agree to pay or reimburse:
(i) Joint Lead Arrangers and Administrative Agent for all of their
reasonable out-of-pocket costs and expenses (including the reasonable fees
and expenses of counsel) in connection with (1) the negotiation,
preparation, execution and delivery of the Credit Documents and the
extension of credit hereunder and (2) the negotiation or preparation of any
modification, supplement or waiver of any of the terms of any Credit
Document (whether or not consummated or effective);
(ii) each of the Lenders and Administrative Agent for all
reasonable out-of-pocket costs and expenses of the Lenders, the Issuing
Lender and Administrative Agent (including the reasonable fees and expenses
of legal counsel) in connection with (1) any Default and any enforcement or
collection proceedings resulting therefrom, including all manner of
participation in or other involvement with (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, (y)
judicial or regulatory proceedings and (z) workout, restructuring or other
negotiations or proceedings (whether or not the workout, restructuring or
transaction contemplated thereby is consummated), (2) the enforcement of
this Section 12.03 and (3) any documentary taxes; and
(iii) each of the Lenders and Administrative Agent for all actual
costs, expenses, taxes, assessments and other charges incurred in
connection with any filing, registration, recording or perfection of any
security interest contemplated by any Credit Document or any other document
referred to therein.
(b) The Obligors, jointly and severally, hereby agree to indemnify
each Creditor and their respective Affiliates, directors, trustees, officers,
employees, investment advisors and agents (each, an "Indemnitee") from, and hold
----------
each of them harmless against, and that no Indemnitee will have any liability
for, any and all Losses incurred by any of them (including any and all Losses
incurred by Administrative Agent, Joint Lead Arrangers or the Issuing Lender to
any Lender, whether or not any Creditor is a party thereto) directly or
indirectly arising out of or by reason of or relating to the negotiation,
execution, delivery, performance, administration or enforcement of any Credit
Document, any of the transactions contemplated by the Credit Documents, any
breach by any Obligor of any representation, warranty, covenant or other
agreement contained in any of the Credit Documents, the use or proposed use of
any of the Loans or Letters of Credit or the use of any collateral security for
the Loans (including the exercise by any Creditor of the rights and remedies or
any power of attorney with respect thereto and any action or inaction in respect
thereof), but excluding (i) any such Losses to the extent finally determined by
a court of competent jurisdiction in a final and nonappealable judgment to have
arisen from the gross negligence or bad faith of the Indemnitee and (ii) claims
among Indemnitees other than to the extent arising out of or as a result of any
direct or indirect act or omission of any Obligor.
Without limiting the generality of the foregoing, the Obligors,
jointly and severally, will indemnify each Creditor and each other Indemnitee
from, and hold each Creditor and each other Indemnitee harmless against, any
Losses described in the preceding sentence arising under any Environmental Law
as a result of (A) the past, present or future operations of any Company (or any
predecessor in interest to Borrower or any Subsidiary), (B) the past, present or
future condition of any site or facility owned, operated or leased at any time
by Borrower or any Subsidiary (or any such predecessor in interest), or (C) any
Release or threatened Re-
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lease of any Hazardous Materials at or from any such site or facility, including
any such Release or threatened Release that shall occur during any period when
any Creditor shall be in possession of any such site or facility following the
exercise by such Creditor of any of its rights and remedies hereunder or under
any of the Security Documents; provided, however, that the indemnity hereunder
-------- -------
shall be subject to the exclusions from indemnification set forth in the
preceding sentence.
To the extent that the undertaking to indemnify and hold harmless set
forth in this Section 12.03 or any other provision of any Credit Document
providing for indemnification is unenforceable because it is violative of any
law or public policy or otherwise, the Obligors, jointly and severally, shall
contribute the maximum portion that each of them is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all indemnified
liabilities incurred by any of the Persons indemnified hereunder.
The Obligors also agree that no Indemnitee shall have any liability
(whether direct or indirect, in contract or tort or otherwise) for any Losses to
any Obligor or any Obligor's security holders or creditors resulting from,
arising out of, in any way related to or by reason of any matter referred to in
any indemnification or expense reimbursement provisions set forth in this
Agreement or any other Credit Document, except to the extent that any Loss is
determined by a court of competent jurisdiction in a final nonappealable
judgment to have resulted from the gross negligence or bad faith of such
Indemnitee.
The Obligors agree that, without the prior written consent of
Administrative Agent, Joint Lead Arrangers and the Majority Lenders, no Obligor
will settle, compromise or consent to the entry of any judgment in any pending
or threatened Proceeding in respect of which indemnification or contribution is
reasonably likely to be sought under the indemnification or contribution
provisions of this Section 12.03 (whether or not any Indemnitee is an actual or
potential party to such Proceeding), unless such settlement, compromise or
consent includes an unconditional written release of each Indemnitee from all
liability arising out of such Proceeding and does not include any statement as
to an admission of fault, culpability or failure to act by or on behalf of any
Indemnitee and does not involve any payment of money or other value by any
Indemnitee or any injunctive relief or factual findings or stipulations binding
on any Indemnitee.
12.04. Amendments, Etc. (a) Any provision of any Credit Document
---------------
may be amended, modified or supplemented by an instrument in writing signed by
the Obligors party thereto and the Majority Lenders, or by the Obligors party
thereto and Administrative Agent acting with the consent of the Majority
Lenders, and any provision of any Credit Documents may be waived by an
instrument in writing signed by the Obligors party thereto and the Majority
Lenders, or by the Obligors party thereto and Administrative Agent acting with
the consent of the Majority Lenders; provided, however, that:
-------- -------
(I) no such amendment, modification, supplement or waiver shall,
unless by an instrument signed by all of the Lenders or by Administrative
Agent acting with the consent of each Lender (with Obligations directly
affected in the case of clause (i)): (i) extend the scheduled final
maturity of any Loan or Note, or extend the stated expiration date of any
Letter of Credit beyond the Revolving Credit Commitment Termination Date,
or reduce the rate of interest (other than any waiver of any increase in
the interest rate applicable to any of the Loans pursuant to Section 3.02
as a result of the applicability of the Post Default Rate) or fees thereon,
or extend the time of payment of interest or fees thereon, or reduce the
principal amount thereof, (ii) extend the final maturity of any of the
Commitments (or reinstate any Commitment terminated pursuant to Section
10), (iii) change the currency in which any Obligation is payable, (iv)
amend the terms of this Section 12.04 or Section 4.07, 5 or 11.03, (v)
reduce the percentage specified in the definition of the term "Majority
Lenders" or "Supermajority Lenders" or amend any provision of any Credit
Document requiring the consent of all the Lenders or
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reduce any other percentage of the Lenders required to make any
determinations or waive any rights thereunder or to modify any provision
thereof (it being understood that any additional extensions of credit
pursuant to this Agreement consented to by the Majority Lenders may be
included in such definition without notice to or consent of any other
Lender or Agent on substantially the same terms as the Commitments (and
related extensions of credit) are included on the Closing Date), (vi)
release any Subsidiary Guarantor from its obligations under Section 6
(unless permitted by this Agreement), (vii) consent to the assignment or
transfer by any Obligor of any of its rights and obligations under any
Credit Document, (viii) release all or substantially all the Collateral or
terminate the Lien under any Credit Document in respect of all or
substantially all the Collateral (except as permitted by the Credit
Documents) or agree to additional obligations (other than the Obligations
and any additional extensions of credit hereunder consented to by the
Majority Lenders) being secured by the Collateral, or (ix) amend Section
12.03 or any other indemnification and expense reimbursement provision set
forth in any Credit Document (it being understood that any prepayment
required by Section 2.10(a) may be modified, supplemented or waived by the
Majority Lenders);
(II) no such amendment, modification, supplement or waiver shall
increase the Commitments of any Lender over the amount thereof then in
effect without the consent of such Lender (it being understood that
amendments, modifications or waivers of conditions precedent, covenants,
Defaults or Events of Default shall not constitute an increase of the
Commitment of any Lender);
(III) any modification or supplement of or waiver with respect to
Section 11 which affects any Agent in their respective capacities as such
shall require the consent of such Agent;
(IV) no consent of any Lender need be obtained, and Administrative
Agent is hereby authorized, to release any Lien securing the Obligations on
Property which is the subject of any Disposition permitted by the Credit
Documents;
(V) subject to clause (I)(i) above of this proviso to this Section
12.04(a), the consent of the Supermajority Lenders of the Affected Class
shall be required with respect to any extension of any scheduled
Amortization Payment or any reduction in the amount of any scheduled
Amortization Payment (it being understood that any prepayment required by
Section 2.10(a) may otherwise be modified, supplemented or waived by the
Majority Lenders);
(VI) no modification, amendment, or waiver shall, unless by an
instrument signed by the Supermajority Lenders of the Affected Class or by
Administrative Agent acting with the written consent of the Supermajority
Lenders of the Affected Class, change the timing of the receipt or the
application of mandatory prepayments hereunder as among the Tranche A Term
Loans and the Tranche B Term Loans or the order in which any such
prepayment is applied to the Tranche A Term Loans or Tranche B Term Loans
(although any required prepayment set forth in Section 2.10 may otherwise
be modified, supplemented or waived by the Majority Lenders);
(VII) no reduction of the percentage specified in the definition of
"Majority Revolving Credit Lenders", "Majority Tranche A Term Loan Lenders"
or "Majority Tranche B Term Loan Lenders" shall be made without the consent
each Revolving Credit Lender, each Tranche A Term Loan Lender or each
Tranche B Term Loan Lender, respectively (it being understood that any
additional extensions of credit pursuant to this Agreement consented to by
the Majority Lenders may be included in such definition without notice to
or consent of any other Lender or Agent on substantially the same terms as
the Commitments (and related extensions of credit) are included on the
Closing Date);
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(VIII) no reduction of the percentage specified in the definition of
"Majority Term Lenders" shall be made without the consent of each Tranche A
Term Loan Lender and Tranche B Term Loan Lender (it being understood that
and other additional extensions of credit pursuant to this Agreement
consented to by the Majority Lenders may be included in such definition
without notice to or consent of any other Lender or Agent on substantially
the same terms as the Commitments (and related extensions of credit) are
included on the Closing Date);
(IX) no amendment, modification, supplement or waiver shall make
any change to Section 2.01(e) or the definitions of "Swing Loan
Commitment", "Swing Loan Maturity Date" or "Swing Loans" or the Swing Loan
Note shall be made without the consent of the Swing Loan Lender;
(X) no amendment, modification, supplement or waiver shall affect
the rights or duties of the Issuing Lender in its capacity as such or alter
the obligation of any Revolving Credit Lender pursuant to Section 2.03(e)
or 2.03(f) without the consent of the Issuing Lender; and
(XI) no amendment, modification, supplement or waiver may be made
to any condition precedent to any extension of credit under the Revolving
Credit Facility set forth in subsection 7.2 without the written consent of
the Majority Revolving Credit Lenders, it being understood that no
amendment to or waiver of any representation or warranty or any covenant
contained in this Agreement or any other Credit Document, or of any Default
or Event of Default, shall be deemed to be effective for purposes of
determining whether the conditions precedent set forth in subsection 7.2 to
the making of any extension of credit under the Revolving Credit Facility
have been satisfied unless the Majority Revolving Credit Lenders shall have
consented to such amendment or waiver.
(b) If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement as contemplated by
Section 12.04(a)(I) (other than clause (1) thereof), the consent of the Majority
Lenders, Majority Revolving Credit Lenders, Majority Term Lenders or
Supermajority Lenders, as the case may be, is obtained but the consent of one or
more of such other Lenders whose consent is required is not obtained, then
Borrower shall have the right to replace each such non-consenting Lender or
Lenders (so long as all non-consenting Lenders are so replaced) with one or more
Replacement Lenders pursuant to Section 2.11 so long as at the time of such
replacement, each such Replacement Lender consents to the proposed change,
waiver, discharge or termination; provided, however, that Borrower shall not
-------- -------
have the right to replace a Lender solely as a result of the exercise of such
Lender's rights (and the withholding of any required consent by such Lender)
pursuant to clause (i) of Section 12.04(a)(I).
12.05. Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
12.06. Assignments and Participations. (a) No Obligor may assign
------------------------------
its respective rights or obligations hereunder or under the Notes without the
prior written consent of all of the Lenders.
(b) Each Lender may assign to any Eligible Person any of its Loans,
its Notes, its Letter of Credit Interests and its Commitments (but only with the
consent (which shall not be unreasonably withheld or delayed) of Borrower,
Administrative Agent and Syndication Agent and, in the case of the Revolving
Credit Commitments, the Issuing Lender); provided, however, that (i) no such
-------- -------
consent by Borrower, the Issuing Lender (other than in the case of the
assignment of Revolving Credit Commitments and/or Revolving Credit Loans, in
which event the consent of the Issuing Lender (not to be unreasonably withheld,
delayed or conditioned shall be obtained)), Administrative Agent or Syndication
Agent shall be required in the case of any assignment to an-
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other Lender or any Lender's Affiliate or an Approved Fund of any Lender (in
which case, the assignee and assignor Lenders shall give notice of the
assignment to Administrative Agent and Syndication Agent); (ii) no consent of
Borrower need be obtained if any Default shall have occurred and be continuing;
(iii) each assignment, other than to a Lender or any Lender's Affiliate or an
Approved Fund of any Lender and other than any assignment effected by Merrill
Lynch Capital Corporation or any of its Affiliates in connection with the
syndication of the Commitments and/or the Loans or otherwise, shall be in an
aggregate amount at least equal to $5.0 million unless the assigning Lender's
exposure is reduced to $0 or unless Borrower and Joint Lead Arrangers otherwise
agree; and (iv) in no event may any such assignment be made to any Obligor or
any of its Affiliates without consent of all Lenders. Any assignment of a Loan
shall be effective only upon appropriate entries with respect thereto being made
in the Register (and each Note shall expressly so provide). Any assignment or
transfer of a Loan shall be registered on the Register only upon surrender for
registration of assignment or transfer of the Note evidencing such Loan (if a
Note was issued in respect thereof), accompanied by an instrument in writing
substantially in the form of Exhibit F, and upon consent thereto by Borrower,
---------
Administrative Agent, Syndication Agent and the Issuing Lender to the extent
required above (none of which consents to be unreasonably withheld), one or more
new Notes (if requested by the new Lender) in the same aggregate principal
amount shall be issued to the designated assignee and the old Notes (if any)
issued to the assigning Lender (or its nominee) shall be returned by
Administrative Agent to Borrower marked "cancelled". Upon execution and delivery
by the assignee to Borrower, Administrative Agent and Syndication Agent of an
instrument in writing substantially in the form of Exhibit F, and upon consent
---------
thereto by Borrower, Administrative Agent and the Issuing Lender to the extent
required above (none of which consents to be unreasonably withheld), and in the
case of a Loan, upon appropriate entries being made in the Register the assignee
shall have, to the extent of such assignment (unless otherwise provided in such
assignment with the consent of Administrative Agent), the obligations, rights
and benefits of a Lender hereunder holding the Commitment(s), Loans (or portions
thereof) and Letter of Credit Interests assigned to it (in addition to the
Commitment(s), Letter of Credit Interests and Loans, if any, theretofore held by
such assignee) and the assigning Lender shall, to the extent of such assignment,
be released from the Commitment(s) (or portion(s) thereof) so assigned. Upon any
such assignment (other than to a Lender or any Affiliate of a Lender or any
Approved Fund of a Lender and other than any assignment by Merrill Lynch Capital
Corporation or any of its Affiliates) the assignee Lender shall pay a fee of
$3,500 to Administrative Agent. Upon any such assignment, certain rights and
obligations of the assigning Lender shall survive as set forth in Section 12.07.
Each assignment shall be made pursuant to an agreement substantially in the form
of Exhibit M.
---------
(c) A Lender may sell or agree to sell to one or more other Eligible
Persons a participation in all or any part of any Loans and Letter of Credit
Interests held by it, or in its Commitments, in which event each purchaser of a
participation (a "Participant") shall be entitled to the rights and benefits of
-----------
the provisions of Section 5 (provided, however, that no Participant shall be
-------- -------
entitled to receive any greater amount pursuant to Section 5 than the transferor
Lender would have been entitled to receive in respect of the participation
effected by such transferor Lender had no participation occurred) with respect
to its participation in such Loans, Letter of Credit Interests and Commitments
as if such Participant were a "Lender" for purposes of said Section, but, except
as otherwise provided in Section 4.07(c), shall not have any other rights or
benefits under this Agreement or any Note or any other Credit Document (the
Participant's rights against such Lender in respect of such participation to be
those set forth in the agreements executed by such Lender in favor of the
Participant). All amounts payable by Borrower to any Lender under Section 5 in
respect of Loans, Letter of Credit Interests and its Commitments shall be no
greater than the amount that would have applied if such Lender had not sold or
agreed to sell any participation in such Loans, Letter of Credit Interests and
Commitments, and as if such Lender were funding each of such Loan, Letter of
Credit Interests and Commitments in the same way that it is funding the portion
of such Loan, Letter of Credit Interests and Commitments in which no
participations have been sold. In no event shall a Lender that sells a
participation agree with the Participant to take or refrain from taking any
action hereunder or under any other Credit Document, except that such Lender may
agree with the Participant that it
<PAGE>
-101-
will not, without the consent of the Participant, agree to any modification or
amendment set forth in subclauses (i), (II), (III) or (IX) of clause (I) of the
proviso to Section 12.04(a).
(d) In addition to the assignments and participations permitted under
the foregoing provisions of this Section 12.06, any Lender may assign and pledge
all or any portion of its Loans and its Notes to any United States Federal
Reserve Bank as collateral security pursuant to Regulation A and any Operating
Circular issued by such Federal Reserve Bank and, in the case of a Lender that
is an investment fund, any such Lender may assign or pledge all or any portion
of its Loans and its Notes to its trustee in support of its obligations to its
trustee, without notice to or consent of Borrower, Administrative Agent,
Arranger or Issuing Lender. No such assignment shall release the assigning
Lender from its obligations hereunder.
(e) A Lender may furnish any information concerning Borrower or any
Subsidiary in the possession of such Lender from time to time to assignees and
participants (including prospective assignees and participants) subject,
however, to the provisions of Section 12.11. In addition, each of Administrative
Agent and the Arranger may furnish any information concerning any Obligor or any
of its Affiliates in Administrative Agent's or the Arranger's possession to any
Affiliate of Administrative Agent or the Arranger, subject, however, to the
provisions of Section 12.11. The Obligors shall assist any Lender in
effectuating any assignment or participation pursuant to this Section 12.06
(including during syndication) in whatever manner such Lender reasonably deems
necessary, including participation in meetings with prospective transferees.
12.07. Survival. The obligations of the Obligors under Sections
--------
5.01, 5.05, 5.06 and 12.03, the obligations of each Subsidiary Guarantor under
Section 6.03, and the obligations of the Lenders under Sections 5.06, 11.05 and
12.11, shall survive the repayment of the Loans and Reimbursement Obligations
and the termination of the Commitments and, in the case of any Lender that may
assign any interest in its Commitments, Loans or Letter of Credit Interest
hereunder, shall (to the extent relating to such time as it was a Lender)
survive the making of such assignment, notwithstanding that such assigning
Lender may cease to be a "Lender" hereunder. In addition, each representation
and warranty made, or deemed to be made by a notice of any extension of credit,
herein or pursuant hereto shall be considered to have been relied upon by the
other parties hereto and shall survive the execution and delivery of this
Agreement and the Notes and the making of any extension of credit hereunder,
regardless of any investigation made by any such other party or on its behalf
and notwithstanding that Administrative Agent or any Lender may have had notice
or knowledge of any Default or incorrect representation or warranty.
12.08. Captions. The table of contents and captions and section
---------
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
12.09. Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
12.10. Governing Law; Submission to Jurisdiction; Waivers; Etc. (a)
--------------------------------------------------------
Each Credit Document shall be governed by, and construed in accordance with, the
law of the State of New York, without regard to the principles of conflicts of
laws thereof (except in the case of the other Credit Documents, to the extent
otherwise expressly stated therein). Each Obligor hereby irrevocably and
unconditionally: (a) submits for itself and its property in any Proceeding
relating to any Credit Document 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
<PAGE>
-102-
courts from any thereof; (b) consents that any such Proceeding may be brought in
such courts and waives trial by jury and any objection that it may now or
hereafter have to the venue of any such Proceeding in any such court or that
such Proceeding was brought in an inconvenient court and agrees not to plead or
claim the same; (c) agrees that service of process in any such Proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to Borrower at its address
set forth in Section 12.02 or at such other address of which Administrative
Agent shall have been notified pursuant thereto; and (d) agrees that nothing
herein shall affect the right to effect service of process in any other manner
permitted by law or shall limit the right to sue in any other jurisdiction.
(b) Each Obligor hereby irrevocably appoints and designates CT
Corporation System, whose address is 1633 Broadway, New York, New York 10019, as
its true and lawful attorney and duly authorized agent for service of legal
process of such Obligor.
12.11. Confidentiality. Each Creditor agrees to keep information
obtained by it pursuant hereto and the other Credit Documents identified as
confidential in writing at the time of delivery confidential in accordance with
such Lender's customary practices and agrees that it will only use such
information in connection with the transactions contemplated by this Agreement
and not disclose any of such information other than (a) to such Lender's
employees, representatives, directors, attorneys, auditors, agents, investment
advisors, professional advisors, trustees or affiliates who are advised of the
confidential nature of such information or to any direct or indirect contractual
counterparty in swap agreements or such contractual counterparty's professional
advisor (so long as such contractual counterparty or professional advisor to
such contractual counterparty agrees to be bound by the provision of this
Section 12.11), (b) to the extent such information presently is or hereafter
becomes available to such Lender on a non-confidential basis from any source or
such information that is in the public domain at the time of disclosure, (c) to
the extent disclosure is required by law (including applicable securities laws),
regulation, subpoena or judicial order or process (provided that notice of such
--------
requirement or order shall be promptly furnished to Borrower unless such notice
is legally prohibited) or requested or required by bank, securities, insurance
or investment company regulations or regulators or auditors or any
administrative body or commission (including the Securities Valuation Office of
the National Association of Insurance Commissioners) to whose jurisdiction such
Lender may be subject, (d) to any rating agency to the extent required in
connection with any rating to be assigned to such Lender, (e) to assignees or
participants or prospective assignees or participants who agree to be bound by
the provisions of this subsection 12.11, (f) to the extent required in
connection with any litigation between any Obligor and any Lender with respect
to the Loans or this Agreement and the other Credit Documents or (g) with
Borrower's prior written consent.
12.12. Independence of Representations, Warranties and Covenants. The
---------------------------------------------------------
representations, warranties and covenants contained herein shall be independent
of each other and no exception to any representation, warranty or covenant shall
be deemed to be an exception to any other representation, warranty or covenant
contained herein unless expressly provided, nor shall any such exception be
deemed to permit any action or omission that would be in contravention of
applicable law.
12.13. Severability. Wherever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provisions or the remaining provisions of this Agreement.
12.14. Prior Understandings. This Agreement and the other Credit
--------------------
Documents supersede all prior and contemporaneous understandings and agreements,
whether written or oral, among the parties hereto
<PAGE>
-103-
relating to the transactions provided for herein and therein, except that the
following shall continue to remain in effect: (a) the Commitment Letter (other
than (1) the Term Sheet (as defined in the Commitment Letter) and (2) the
commitment of Merrill Lynch Capital Corporation and NationsBank, N.A.
thereunder), (b) the Fee Letter and (c) Administrative Agent's Fee Letter.
12.15. Acknowledgments. The Obligors hereby acknowledge that: (a)
---------------
each of them has been advised by counsel in connection with the negotiation,
execution and delivery of the Credit Documents; (b) no Creditor has any
fiduciary or similar relationships to any Obligor and the relationship between
the Creditors on the one hand, and the Obligors, on the other hand, is solely
that of debtor and creditor; and (c) no joint venture exists among the Creditors
or among the Obligors and the Creditors.
[Signature Pages Follow]
<PAGE>
S-1
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
NORWOOD PROMOTIONAL PRODUCTS, INC.
By:_____________________________________
Name:
Title:
Address for Notices:
Attention:
Telecopier No.:
Telephone No.:
<PAGE>
S-2
AIR-TEX CORPORATION
ARTMOLD PRODUCTS CORPORATION
BARLOW ACQUISITION, INC.
BARLOW PROMOTIONAL PRODUCTS, INC.
KEY INDUSTRIES, INC.
NORCORP, INC.
RADIO CAP COMPANY, INC.
By:_______________________________________
Name:
Title:
Address for Notices:
Attention:
Telecopier No.:
Telephone No.:
<PAGE>
S-3
NATIONSBANK, N.A.,
as Administrative Agent
By:___________________________________________
Name:
Title:
Address for Notices as Administrative Agent
800 Market Street
12th Floor
St. Louis, MO 63101
Attention: Steven A. Linton
Telecopier No.: (314) 466-6744
Telephone No.: (314) 466-6435
<PAGE>
S-4
MERRILL LYNCH & CO.,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED,
as Joint-Lead Arranger, Syndication Agent and
Documentation Agent
By:___________________________________________
Name:
Title:
Address for Notices:
World Financial Center
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner
& Smith Incorporated
South Tower
225 Liberty Street
New York, New York 10080-6114
Attention: Brian E. O'Callahan
Telecopier No.: (212) 449-8230
Telephone No.: (212) 449-8221
<PAGE>
S-5
NATIONSBANC MONTGOMERY SECURITIES, LLC,
as Joint Lead Arranger
By:_____________________________________
Name:
Title:
Address for Notices:
100 N. Tryon Street, 7th Floor
Charlotte NC 28255
Attention: Mark Huffstetler
Telecopier No.: (704) 388-0209
Telephone No.: (704) 388-0181
<PAGE>
LENDERS
-------
MERRILL LYNCH CAPITAL CORPORATION,
as a Lender
By:_____________________________________
Name:
Title:
Lending Office for all Loans:
World Financial Center
c/o Merrill Lynch & Co.
North Tower - 7th Floor
250 Vesey Street
New York,New York 10281-1307
Address for Notices:
World Financial Center
c/o Merrill Lynch & Co.
South Tower
225 Liberty Street
New York, New York 10080-6114
Attention: Brian E. O'Callahan
Telecopier No.: (212) 449-8230
Telephone No.: (212) 449-8221
<PAGE>
NATIONSBANK, N.A.,
as a Lender
By:______________________________________
Name:
Title:
Address for Notices:
Commercial Banking Group
800 Market Street
12th Floor
St. Louis, MO 63101
Attention: Steven A. Linton
Telecopier No.: (314) 446-6499
Telephone No.: (800) 944-0404
<PAGE>
CREDIT AGRICOLE INDOSUEZ,
as a Lender
By:____________________________________
Name:
Title:
Address for Notices:
55 East Monroe Street
Chicago, IL 60603
Attention: Eric Robinson
Telecopier No.: (312) 372-2830
Telephone No.: (312) 917-7532
<PAGE>
THE FROST NATIONAL BANK,
as a Lender
By:_________________________________
Name:
Title:
Address for Notices:
100 West Houston Street
San Antonio, TX 78296
Attention: John Harris
Telecopier No.:(210) 220-4626
Telephone No.: (210) 220-5350
<PAGE>
GUARANTY FEDERAL BANK, F.S.B.,
as a Lender
By:___________________________________
Name:
Title:
Address for Notices:
1100 Northeast Loop 410
San Antonio, TX 78209
Attention: Jim R. Hamilton
Telecopier No.: (210) 930-1783
Telephone No.: (210) 930-2926
<PAGE>
PARIBAS,
as a Lender
By:____________________________________
Name:
Title:
Address for Notices:
1200 Smith Street, Suite No. 3100
Houston, TX 77002
Attention: Larry Robinson
Telecopier No.: (713) 659-5234
Telephone No.: (713) 659-4811
<PAGE>
MAINSTAY VP SERIES FUND, INC.,
ON BEHALF OF ITS HIGH YIELD
CORPORATE BOND PORTFOLIO,
as a Lender
By: MacKay-Shields Financial Corporation,
Its: Investment Advisor
By:_____________________________________________
Name: Jeffry B. Platt
Title: Director
Address for Notices:
c/o MacKay-Shields Financial Corporation
9 West 57th Street, 37th Floor
New York, New York 10019
Attention: Melanie Westerlund
Telecopier No.: (212) 758-4077
Telephone No.: (212) 230-3849
<PAGE>
THE MAINSTAY FUNDS,
ON BEHALF OF ITS HIGH YIELD
CORPORATE BOND FUND SERIES,
as a Lender
By: MacKay-Shields Financial Corporation,
Its: Investment Advisor
By:___________________________________________
Name: Jeffry B. Platt
Title: Director
Address for Notices:
c/o MacKay-Shields Financial Corporation
9 West 57th Street, 37th Floor
New York, New York 10019
Attention: Melanie Westerlund
Telecopier No.: (212) 758-4077
Telephone No.: (212) 230-3849
<PAGE>
THE PROVIDENT BANK,
as a Lender
By:____________________________________
Name:
Title:
Address for Notices:
One East Fourth Street
#216A
Cincinnati, OH 45202
Attention: Alan R. Henning
Telecopier No.: (513) 579-2858
Telephone No.: (513) 579-2747
<PAGE>
MERCANTILE BANK NATIONAL ASSOCIATION,
as a Lender
By:_________________________________________
Name:
Title:
Address for Notices:
One Mercantile Center
Tram 001/1001/12-3
St. Louis, MO 63101-1643
Attention: Kathy Robinson
Telecopier No.: (314) 425-8292
Telephone No.: (314) 418-2514
<PAGE>
UNION BANK OF CALIFORNIA, N.A.,
as a Lender
By:_____________________________________
Name:
Title:
Address for Notices:
350 California Street, 6th Floor
San Francisco, CA 94104
Attention: David Kinkela
Telecopier No.: (415) 705-5093
Telephone No.: (415) 705-7048
<PAGE>
PILGRIM AMERICA PRIME RATE TRUST,
as a Lender
By: Pilgrim America Investments, Inc.
as its Investment Manager
By:_________________________________________
Name:
Title:
Address for Notices:
Two Renaissance Square
40 North Central Avenue
Suite 1200
Phoenix, AZ 85004-3444
Attention: Melina Dempsey
Telecopier No.:
Telephone No.: (602) 417-8100
<PAGE>
ANNEX A
<TABLE>
<CAPTION>
Revolving
Credit Term Loan A Term Loan B
Institution Commitment Commitment Commitment Total
----------- ---------- ---------- ---------- -----
<S> <C> <C> <C> <C>
1. Merrill Lynch Capital $1,354,166.67 $1,895,838.34 $7,000,000.00 $10,250,00.00
Corporation
2. NationsBank, N.A. 3,020,833.33 4,229,166.66 3,000,000.00 10,250,000.00
3. Paribas 2,708,333.33 3,791,666.67 3,500,000.00 10,000,000.00
4. Guaranty Federal Bank, F.S.B. 4,166,666.67 5,833,333.33 10,000,000.00
5. The Mainstay Funds, On Behalf 8,700,000.00 8,700,000.00
Of Its High Yield Corporate
Bond Fund Series
6. Mainstay VP Series Fund, Inc., 1,300,000.00 1,300,000.00
On Behalf Of Its High Yield
Corporate Bond Portfolio
6. Union Bank of California, N.A. 3,750,000.00 5,250,000.00 9,000,000.00
7. Pilgrim America Prime Rate Trust 9,000,000.00 9,000,000.00
8. Credit Agricole Indosuez 3,333,333.33 4,666,666.67 8,000,000.00
9. The Frost National Bank 3,333,333.33 4,666,666.67 8,000,000.00
10. Mercantile Bank National 3,333,333.33 4,666,666.67 8,000,000.00
Association
11. The Provident Bank 7,500,000.00 7,500,000.00
------------- ------------- ------------- -------------
Total $ 25,000,000 $ 35,000,000 $ 40,000,000 $ 100,000,000
============= ============= ============= =============
</TABLE>
<PAGE>
EXHIBIT B.2
================================================================================
SUBORDINATED LOAN AGREEMENT
---------------------------
DATED AS OF OCTOBER 30, 1998
BETWEEN
THE STATE BOARD OF ADMINISTRATION OF FLORIDA
AND
NORWOOD PROMOTIONAL PRODUCTS, INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS.......................................................... 1
1.01 Certain Definitions............................................ 1
1.02 Accounting Principles.......................................... 11
ARTICLE II
THE CREDIT........................................................... 11
2.01 Subordinated Loan.............................................. 11
2.02 The Subordinated Note; Repayment of Principal.................. 11
2.03 Interest....................................................... 12
2.04 Prepayment of Subordinated Loan................................ 13
2.05 Payments....................................................... 14
ARTICLE III
REPRESENTATIONS AND WARRANTIES....................................... 15
3.01 Organization and Qualification................................. 15
3.02 Corporate Power................................................ 15
3.03 Subsidiaries; Investments; Partnerships........................ 15
3.04 Conflict with Other Instruments................................ 16
3.05 Authorization, Governmental Approvals.......................... 16
3.06 Validity and Binding Effect.................................... 17
3.07 No Event of Default; Compliance with Agreements................ 17
3.08 Solvency, etc.................................................. 17
3.09 Margin Regulations............................................. 17
3.10 Investment Company; Public Utility Holding Company............. 18
3.11 Merger Agreement............................................... 18
3.12 Stock and Warrant Purchase Agreement........................... 18
3.13 Subordination Agreements....................................... 19
3.14 Disclosure..................................................... 19
3.15 Closing Date................................................... 19
ARTICLE IV
CONDITIONS PRECEDENT................................................. 19
4.01 Conditions to Loans............................................ 19
ARTICLE V
COVENANTS............................................................ 22
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.01 Affirmative Covenants.......................................... 22
5.02 Negative Covenants............................................. 25
5.03 Reporting Requirements......................................... 34
ARTICLE VI
DEFAULT.............................................................. 37
6.01 Events of Default.............................................. 37
6.02 Consequences of Event of Default............................... 39
6.03 Rights of Setoff............................................... 40
6.04 Other Rights................................................... 40
6.05 Automatic Rescission of Certain Accelerations.................. 40
ARTICLE VII
SUCCESSORS AND ASSIGNS; PARTICIPATIONS............................... 41
7.01 Successors and Assigns in General.............................. 41
7.02 Conditions..................................................... 41
7.03 Payments; Set Off.............................................. 43
7.04 Further Assurance.............................................. 43
ARTICLE VIII
MISCELLANEOUS........................................................ 43
8.01 Modifications, Amendments or Waivers........................... 43
8.02 No Implied Waivers; Cumulative Remedies; Writing Required...... 45
8.03 Reimbursement of Expenses; Taxes............................... 45
8.04 Holidays....................................................... 46
8.05 Notices........................................................ 46
8.06 Survival....................................................... 47
8.07 Governing Law; Waivers and Jurisdiction........................ 47
8.08 Descriptive Headings; Interpretation; No Strict Construction... 48
8.09 Severability................................................... 48
8.10 Counterparts................................................... 48
8.11 Brokers Fees................................................... 48
8.12 Indemnification................................................ 49
8.13 Payment Set Aside.............................................. 50
8.14 Complete Agreement............................................. 50
8.15 Public Disclosures............................................. 50
8.16 Schedules...................................................... 50
8.17 Delivery by Facsimile.......................................... 50
</TABLE>
-ii-
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit A - Subordinated Note
Exhibit B - Disclosure Schedule
Exhibit C - Opinion of Counsel
Exhibit D(1) - Borrower Subordination Agreement
Exhibit D(2) - Subsidiaries Subordination Agreement
Exhibit E - Subordinated Guaranty
-iii-
<PAGE>
LIST OF DISCLOSURE SCHEDULES
----------------------------
Section 3.03 - Subsidiaries; Investments; Partnerships
Section 3.04 - Conflicts
Section 3.05 - Authorization; Approvals
Section 3.07 - Compliance with Agreements
Section 3.14 - Disclosure
Section 5.02(a) - Indebtedness
Section 5.02(b) - Liens
Section 5.02(c) - Guaranties
Section 5.02(i) - Investments
-iv-
<PAGE>
NORWOOD PROMOTIONAL PRODUCTS, INC.
SUBORDINATED LOAN AGREEMENT
---------------------------
THIS AGREEMENT is made as of October 30, 1998, by and between Norwood
Promotional Products, Inc., a Texas corporation ("Borrower"), and The State
--------
Board of Administration of Florida ("Lender").
------
Pursuant to the Agreement and Plan of Merger dated as of March 15,
1998, as amended (the "Merger Agreement"), by and between Borrower and FPK, LLC,
----------------
a Delaware limited liability company ("FPK"), a newly formed subsidiary of FPK
---
("Newco") will as of the date hereof be merged with and into Borrower, with
-----
Borrower continuing as the surviving corporation (the "Merger").
------
In connection with the Merger, Borrower desires to borrow, and Lender
desires to lend, on the terms and conditions set forth in this Agreement, funds
on a term loan basis to be evidenced by a promissory note in the form attached
hereto as Exhibit A (the "Subordinated Note").
--------- -----------------
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements set forth herein and intending to be legally bound
hereby, covenant and agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.01 Certain Definitions. In addition to other terms defined
-------------------
elsewhere in this Agreement, the following terms shall have the meanings set
forth below:
"Affiliate" of any Person shall mean any other Person directly or
---------
indirectly controlling, controlled by or under common control with such Person.
For purposes of this definition, "control" shall include the direct or indirect
ownership of 10% or more of the voting securities or interests of such Person.
"Agent" shall mean the agent described in Section 7.02 hereof.
-----
"Agreement" shall mean this Subordinated Loan Agreement and all other
---------
agreements, instruments, schedules, exhibits, and documents attached hereto or
delivered in connection herewith as any or all of the foregoing may be amended,
modified and supplemented from time to time.
"Assignee" shall mean any assignee described in Section 7.02 hereof.
--------
"Borrower" shall have the meaning set forth in the preamble hereto.
--------
<PAGE>
"Business Day" shall mean any day other than a Saturday, Sunday or
------------
public holiday under the laws of the State of New York or the Commonwealth of
Massachusetts or other day on which banking institutions are authorized or
obligated to close in New York, New York, or Boston, Massachusetts.
"Buyout Group" shall have the meaning set forth with respect thereto
------------
in the Merger Agreement.
"Capitalized Lease" shall mean a lease under which the obligations of
-----------------
the lessee would, in accordance with GAAP consistently applied, be included in
determining total liabilities as shown on the liability side of a balance sheet
of the lessee.
"Capitalized Lease Obligations" shall mean the amount of the
-----------------------------
liability reflecting the aggregate discounted amount of future payments under
all Capitalized Leases calculated in accordance with GAAP consistently applied
and Statement of Financial Accounting Standards No. 13.
"Change in Ownership"shall mean:
-------------------
(a) prior to the consummation of an Initial Public Offering, any
transaction or event (including, without limitation, a sale, issuance or
exchange, or series of sales, issuances or exchanges, of Borrower's capital
stock, or any merger or consolidation or recapitalization involving Borrower,
but excluding any Initial Public Offering) as a direct or indirect result of
which:
(A) the holders of Common Stock immediately after the Closing
(together with any Krasovec Holders and Liberty Holders) no longer possess
collectively the voting power to elect a majority of Borrower's board of
directors, or
--
(B) the holders of Common Stock immediately after the Closing
(together with their Permitted Transferees (as defined in the Shareholders'
Agreement), any Krasovec Holders and any Liberty Holders) no longer hold in
the aggregate record and beneficial ownership of a majority of the
outstanding Common Stock, or
--
(C) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other
than any Krasovec Holder or Liberty Holder, acquires directly or indirectly
the "beneficial ownership" (as that term is used in Section 13(d) of the
Securities Exchange Act of 1934, as amended) of a majority of the
outstanding Common Stock or of capital stock having the voting power (under
ordinary circumstances) to elect a majority of Borrower's board of
directors; or
--
(b) if, during any consecutive 24-month period ending after the
consummation of an Initial Public Offering, individuals who at the beginning of
such period constituted the board of directors of Borrower (together with any
new directors whose election by such board of directors or whose nomination for
election by the shareholders of Borrower was approved by a vote of at least 66b%
of the directors of Borrower then still in office who were either directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any
-2-
<PAGE>
reason to constitute at least a majority of the board of directors of Borrower
then in office (provided that such cessation shall be a Change in Ownership only
--------
if both (1) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended), other than any
Krasovec Holder or Liberty Holder, then has "beneficial ownership" (as such term
is used in Section 13(d) of the Securities Exchange Act of 1934, as amended) of
at least 33a% of the outstanding Common Stock or of at least 33a% of the
aggregate voting power to elect members to Borrower's Board of Directors, and
(2) the Krasovec Holders and Liberty Holders then collectively have the
"beneficial ownership" of a smaller percentage of the Common Stock or voting
power than such "person" or "group").
"Closing" shall mean the "Effective Time" (as defined in the Merger
-------
Agreement) of the closing of the Merger pursuant to the Merger Agreement.
"Closing Date" shall have the meaning set forth with respect thereto
------------
in the Merger Agreement.
"Common Stock" shall mean, collectively, Borrower's Common Stock, par
------------
value $.01 per share, and any capital stock of any class of Borrower 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 Borrower.
"Consolidated EBITDA" shall have the meaning set forth in the Senior
-------------------
Loan Agreement as in effect on the date hereof.
"Consolidated Fixed Charges" shall have the meaning set forth in the
--------------------------
Senior Loan Agreement as in effect on the date hereof.
"Controlled Group" shall mean the "controlled group of corporations",
----------------
as that term is defined in Section 1563(a) of the Internal Revenue Code, of
which Borrower is a part from time to time.
"Disclosure Schedule" shall mean the Disclosure Schedule attached as
-------------------
Exhibit B hereto. Disclosures set forth on the Disclosure Schedule shall be
- ---------
ordered under descriptive headings in order to identify to what section(s) of
this Agreement such disclosure relates.
"Disqualified Capital Stock" shall mean, with respect to any Person,
--------------------------
any capital stock or other equity securities or interests of such Person that,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures
(excluding any maturity as the result of an optional redemption by the issuer
thereof) or is mandatorily redeemable (other than solely for capital stock or
other equity securities or interests of such Person that are not Disqualified
Capital Stock), pursuant to a sinking fund obligation or otherwise, or is
redeemable at the sole option of the holder thereof (other than solely for
capital stock or other equity securities or interests of such Person that are
not Disqualified Capital Stock), in whole or in part, on or prior to the date
which is 90 days after the final scheduled payment of the Loan under Section
2.02.
-3-
<PAGE>
"Dividend" shall mean any distribution by a corporation or other
--------
entity with respect to its capital stock or other ownership interests whether in
cash, securities (including common and preferred stock) or other property.
"Environmental Laws" shall mean all present and future federal, state
------------------
or local laws, statutes, ordinances, codes, rules, regulations, orders, decrees
or directives imposing liability or standards of conduct with respect to
environmental protection, industrial hygiene or the protection of human health
and safety from environmental hazards, natural resources, pollution or waste
management.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as the same may from time to time be amended, and the rules and
regulations of any governmental agency or authority, as from time to time in
effect, promulgated thereunder.
"ERISA Affiliate" as applied to any entity shall mean any trade or
---------------
business (whether or not incorporated) which is a member of a group of which
that entity is a member and which is under common control within the meaning of
the regulations promulgated under Section 414 of the Internal Revenue Code.
"Event of Default" shall mean any of the Events of Default described
----------------
in Section 6.01 hereof.
"Excess Cash Flow" shall have mean meaning set forth in the Senior
----------------
Loan Agreement as in effect on the date hereof.
"Federal Reserve Board" has the meaning set forth in Section 3.09.
---------------------
"FPK" has the meaning set forth in the preamble hereto.
---
"GAAP" shall mean generally accepted accounting principles as
----
promulgated by the Accounting Principles Board of the American Institute of
Certified Public Accountants and by the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), as in effect from time to time (subject to the
provisions of Section 1.02 hereof).
"Guaranty" shall include any guaranty of the payment or performance of
--------
any Indebtedness or other obligation and any other arrangement whereby credit is
extended to one obligor on the basis of any promise of another Person, whether
that promise is expressed in terms of an obligation to (i) pay the Indebtedness
or other liabilities of such obligor, (ii) purchase an obligation owed by such
obligor, (iii) purchase goods and services from such obligor pursuant to a take-
or-pay contract or (iv) maintain the capital, working capital, solvency or
general financial condition of such obligor, whether or not any such arrangement
is listed on the balance sheet of such other Person or referred to in a footnote
thereto, but shall not include endorsements of items for collection in the
ordinary course of business. The amount of any guaranty shall be equal to the
amount of the obligation so guaranteed or otherwise supported or, if not a fixed
or determined amount, the maximum amount guaranteed or supported.
-4-
<PAGE>
"Hardship" shall mean certain facts and circumstances, such as a
--------
medical emergency affecting any current holder of Common Stock (who is a current
employee of Borrower or its Subsidiaries) or his immediate family or the need of
such a holder (who is a current employee of Borrower or its Subsidiaries) to pay
educational expenses, such as college tuition, as a result of which such current
holder (who is a current employee of Borrower or its Subsidiaries prior to such
event) or spouses or other heirs of such employee requests Borrower or the other
holders of Common Stock to buy all or some of his Common Stock, which request
the Board of Directors of Borrower (or a designated committee thereof) will
permit or deny in its sole discretion.
"Hazardous Materials" shall mean all or any of the following: (i)
-------------------
substances that are defined or listed in, or otherwise classified pursuant to,
any applicable Environmental Laws as "hazardous substances," "hazardous
materials," "hazardous wastes," "toxic substances" or any formulation intended
to define, list or classify substances by reason of deleterious properties such
as ignitability, corrosivity, reactivity, carcinogenicity, reproductive
toxicity, "TLCP" toxicity or "EP" toxicity; (ii) oil, petroleum or petroleum
derived substances, natural gas, natural gas liquids or synthetic gas and
drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or geothermal
resources; (iii) any flammable substances or explosives or any radioactive
materials; and (iv) asbestos in any friable form or electrical equipment which
contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty parts per million.
"Indebtedness" of any Person shall include all obligations for
------------
borrowed money (including obligations incurred in exchange or replacement
thereof), all obligations evidenced by any note, bond, debenture or other debt
security, all obligations arising from deferred or installment purchases of
property or services (excluding unsecured trade payables incurred in the
ordinary course of business which are not more than 30 days past due), all
Capitalized Lease Obligations, all obligations arising under acceptance
facilities, the face amount of all outstanding letters of credit for the benefit
of the Person in question and (without duplication) all drafts drawn thereunder,
all obligations secured by a Lien on property of the Person in question, all
obligations under interest rate or currency exchange or swap agreements and all
asserted withdrawal liabilities under Multiemployer Plans.
"Indemnified Liabilities" has the meaning set forth in Section
-----------------------
8.12(a).
"Indemnitees" has the meaning set forth in Section 8.12(a).
-----------
"Initial Public Offering" shall mean the initial sale by Borrower of
-----------------------
shares of its Common Stock, occurring after the date hereof, in an offering
registered with the Securities and Exchange Commission under the Securities Act
of 1933, as amended.
"Interest Coverage Ratio" shall have the meaning set forth in the
-----------------------
Senior Loan Agreement as in effect on the date hereof.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
---------------------
as amended.
-5-
<PAGE>
"Investments" shall mean amounts paid or agreed to be paid for stock,
-----------
securities, liabilities or assets of, or loaned, advanced or contributed to,
other Persons. The term Investments shall not include any increase or decrease
in the assets of any Person derived from the earnings or losses thereof or any
assets purchased in the ordinary course of business, but shall include the
acquisition of a company, business or product line by Borrower or any of its
Subsidiaries.
"Krasovec Holders" means Frank P. Krasovec, his spouse and his
----------------
children, any of their respective Subsidiaries, or any charitable trust or
charitable foundation to which Frank P. Krasovec bequeaths or transfers any
shares of Borrower's capital stock.
"Lender" shall have the meaning set forth in the preamble hereto. For
------
the avoidance of doubt, for purposes of Section 7.02(c), the term "Lender" shall
mean only the party extending credit to Borrower hereunder on the Closing Date.
"Leverage Ratio" shall have the meaning set forth in the Senior Loan
--------------
Agreement as in effect on the date hereof.
"Liberty" shall mean Liberty Partners Holdings 17, L.L.C., a Delaware
-------
limited liability company.
"Liberty Holders" means Liberty, Lender, and their respective
---------------
successors, assigns and transferees of Borrower's capital stock (and each such
Person's respective successors, assigns and transferees of Borrower's capital
stock, and so on).
"Lien" shall mean any security interest, pledge, bailment (in the
----
nature of a pledge or for purposes of security), mortgage, deed of trust, the
grant of a power to confess judgment, conditional sales and title retention
agreement (including any lease in the nature thereof), charge, lien,
encumbrance, restriction or other similar arrangement or interest in real or
personal property.
"Loan" shall mean the Subordinated Loan made pursuant to this
----
Agreement.
"Material Adverse Effect" shall mean a material adverse effect on (a)
-----------------------
the business, properties, assets, liabilities, conditions (financial or
otherwise) or prospects of Borrower and its Subsidiaries taken as a whole, or
(b) the ability of Borrower or any of its Subsidiaries to perform their
respective obligations under this Agreement, the Subordinated Note, the Senior
Loan Agreement, the Senior Notes or the other Senior Loan Documents.
"Material Plan" shall mean at any time a Plan or Plans having
-------------
aggregate Unfunded Liabilities in excess of $5.0 million. For purposes of this
definition, "Unfunded Liabilities" shall mean, with respect to any Plan at any
time, the amount (if any) by which (x) the value of all benefit liabilities
under such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (y) the
fair market value of all Plan assets allocable to such liabilities under Title I
of ERISA (excluding any accrued but unpaid contributions), all determined as of
the then most recent valuation date for such Plan.
-6-
<PAGE>
"Material Subsidiary" shall mean any Subsidiary (together with its
-------------------
Subsidiaries) of Borrower, which meets any of the following conditions:
(1) Borrower's and its other Subsidiaries' Investments in and
advances to such Subsidiary exceed 5.0% of the total assets of Borrower and
its Subsidiaries (computed on a consolidated basis either according to net
book value, determined in accordance with GAAP consistently applied, or
fair market value, determined by Borrower's Board of Directors in its
reasonable good faith judgment); or
(2) Borrower's and its other Subsidiaries' proportionate share
of the total assets (after intercompany eliminations) of such Subsidiary
exceeds 5.0% of the total assets of Borrower and its Subsidiaries (computed
on a consolidated basis either according to net book value, determined in
accordance with GAAP consistently applied, or fair market value, determined
by Borrower's Board of Directors in its reasonable good faith judgment); or
(3) Borrower's and its other Subsidiaries' equity in the income
from continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principles of such Subsidiary
exceeds 5.0% of such income of Borrower and its Subsidiaries on a
consolidated basis, in each case for the most recently completed fiscal
year of Borrower.
With respect to any provision in this Agreement that refers to any action taken
by, or any event or circumstance occurring or existing with respect to, a
"Material Subsidiary," the term "Material Subsidiary" as used in such provision
shall also include any group of Subsidiaries taken together as to which (i) if
such Subsidiaries were treated on a consolidated basis as a single Subsidiary,
such consolidated Subsidiary would constitute a "Material Subsidiary" under this
definition, and (ii) such action has been taken by, or such event or
---
circumstance has occurred or exists with respect to, each and all of the
Subsidiaries in such group (disregarding, for purposes of such determination,
whether any such Subsidiary individually constitutes a "Material Subsidiary"
------------
under this definition).
"Measurement Period" shall mean the most recent four full fiscal
------------------
quarters of Borrower for which financial statements have been provided pursuant
to Section 5.03.
"Merger" shall have the meaning set forth in the preamble hereto.
------
"Merger Agreement" shall have the meaning set forth in the preamble
----------------
hereto, as such agreement is amended, modified and supplemented from time to
time in accordance with the provisions of this Agreement.
"Multiemployer Plan" shall mean any Plan which is a "multiemployer
------------------
plan" as defined in Section 3(37) of ERISA.
"Newco" has the meaning set forth in the preamble hereto.
-----
-7-
<PAGE>
"Operating Lease" shall mean for any Person any lease of property
---------------
which would not be classified as a Capitalized Lease under GAAP consistently
applied, other than a lease under which such Person is the lessor.
"Participant" shall mean any participant described in Section 7.02
-----------
hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA, or any other governmental agency,
department or instrumentality succeeding to the functions of such corporation.
"Permitted Liens" shall mean the Liens set forth in paragraphs (1)
---------------
through (21) of Section 5.02(b) hereof.
"Person" shall mean any individual, corporation, partnership, limited
------
liability company, trust or governmental entity or agency.
"Plan" shall mean at any time any employee pension benefit plan which
----
is covered by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Internal Revenue Code and either (i) is maintained, or
contributed to, by any member of the Controlled Group for employees of any
member of the Controlled Group, (ii) has at any time within the preceding five
years been maintained, or contributed to, by any Person which was at such time a
member of the Controlled Group for employees of any Person which was at such
time a member of the Controlled Group, or (iii) with respect to which Borrower
or a Subsidiary could incur liability.
"Potential Event of Default" shall mean any occurrence, condition, act
--------------------------
or omission which with the passage of time or the giving of notice or both could
result in an Event of Default hereunder.
"Preferred Stock" shall mean, collectively, the Series A Preferred
---------------
Stock, par value $.01 per share, of Borrower and any capital stock of any class
of Borrower hereafter authorized that does not constitute Common Stock.
"Quarterly Payment Date" shall mean the last Business Day of each
----------------------
March, June, September and December.
"Reportable Event" shall mean any of the events which are reportable
----------------
under Section 4043 of ERISA and the regulations thereunder, other than an
occurrence for which the 30-day notice contained in 29 C.F.R. '2615.3(a) is duly
waived.
"Semi-Annual Payment Date" shall mean the last Business Day of each
------------------------
October and April.
"Senior Debt" shall have the meaning set forth in the Subordination
-----------
Agreements.
"Senior Financial Covenants" has the meaning set forth in Section
--------------------------
8.01(b) hereof.
-8-
<PAGE>
"Senior Lenders" shall mean Merrill Lynch Capital Corporation,
--------------
NationsBank, N.A., and their respective successors, assigns and participants
under the Senior Loan Agreement, and any other subsequent holders of Senior
Debt; provided that with respect to any consent, approval, decision,
--------
determination or other action to be taken hereunder by the Senior Lenders, such
action may be taken on behalf of the Senior Lenders by the "Administrative
Agent" (as defined under the Senior Loan Agreement) in accordance with the
provisions of the Senior Loan Agreement, or by any other agent or representative
(of which the Lender has received written notice) authorized or appointed by the
Senior Lenders in accordance with the Senior Loan Documents.
"Senior Loan Agreement" shall mean that certain Senior Credit Facility
---------------------
entered into by and among the Borrower, Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, NationsBank, N.A., and the other financial
institutions party thereto, as originally executed and delivered and as such
agreement in whole or in part may be, in one or more agreements with one or more
bank lending groups, amended, renewed, extended, substituted, refinanced,
replaced, restructured or otherwise modified from time to time (including,
without limitation, any successive renewals, extensions, substitutions,
refinancing, restructuring, replacements and other modifications of the
foregoing), including to increase the commitments thereunder or to add or
eliminate borrowers or guarantors thereunder.
"Senior Loan Documents" shall mean the Senior Loan Agreement, all
---------------------
notes issued thereunder, all collateral agreements, and all other agreements and
instruments entered into by the parties thereto in connection with the Senior
Loan Agreement (including without limitation, Swap Contracts (as defined in the
Senior Loan Agreement)), all as originally executed and delivered and as such
agreements and instruments in whole or in part may be, in one or more agreements
with one or more bank lending groups, amended, renewed, extended, substituted,
refinanced, replaced, restructured or otherwise modified from time to time
(including, without limitation, any successive renewals, extensions,
substitutions, refinancing, restructuring, replacements and other modifications
of the foregoing), including to increase the commitments thereunder or to add or
eliminate borrowers or guarantors thereunder.
"Senior Notes" shall mean the "Revolving Credit Notes," the "Term Loan
------------
Notes," and the "Swing Loan Note" (each as defined in the Senior Loan
Agreement), and all other notes representing any Senior Debt and shall include
all amendments, modifications, extensions, renewals, refinancings or refundings
thereof in whole or in part from time to time in accordance with the provisions
thereof; provided that the "Senior Notes" shall not include any notes
--------
representing Indebtedness or other liabilities or obligations that do not
constitute Senior Debt.
"Senior Term Loan" shall mean the "Term Loans" (as defined under the
----------------
Senior Loan Agreement) and shall include all amendments, modifications,
extensions, renewals, refinancings or refundings thereof in whole or in part
from time to time in accordance with the provisions thereof; provided that the
--------
"Senior Term Loan" shall not include any Indebtedness or other liabilities or
obligations that do not constitute Senior Debt.
"Senior Revolving Loan" shall mean, collectively, the "Revolving
---------------------
Loans" and the "Swing Loans" (each as defined under the Senior Loan Agreement)
and shall include all amendments, modifications, extensions, renewals,
refinancings or refundings thereof in whole or in
-9-
<PAGE>
part from time to time in accordance with the provisions thereof; provided that
--------
the "Senior Revolving Loan" shall not include any Indebtedness or other
liabilities or obligations that do not constitute Senior Debt.
"Shareholders' Agreement" shall mean the Shareholders' Agreement of
-----------------------
even date herewith by and among Borrower and certain of its stockholders, as
such agreement may be amended, modified or supplemented from time to time in
accordance with the provisions thereof.
"Stock and Warrant Purchase Agreement" shall mean the Stock and
------------------------------------
Warrant Purchase Agreement of even date herewith by and among Borrower, Lender,
and Liberty, as such agreement may be amended, modified or supplemented from
time to time in accordance with the provisions thereof and of this Agreement.
"Stock Purchase" shall mean any redemption, acquisition, purchase or
--------------
other retirement of any capital stock or other ownership interest of Borrower or
any of its Subsidiaries (including preferred stock) or of any warrants, rights
or other options to purchase such capital stock or other ownership interest,
other than upon any conversion thereof into or exchange thereof for other shares
of Borrower's or any Subsidiary's capital stock.
"Subordinated Guaranty" shall mean the Subordinated Guaranty executed
---------------------
by each of Borrower's Subsidiaries dated as of the date hereof in the form
attached hereto as Exhibit E, as such agreement is amended, modified and
---------
supplemented from time to time in accordance with the provisions thereof.
"Subordinated Note" shall mean the Subordinated Note issued hereunder
-----------------
and shall include all amendments, modifications, extensions, renewals,
refinancings or refundings thereof in whole or in part in accordance with the
provisions thereof and of this Agreement.
"Subordination Agreements" shall mean, collectively, the Borrower
------------------------
Subordination Agreement in the form of Exhibit D(1) attached hereto, dated the
------------
date hereof, by and among Borrower, Lender and the Senior Lenders, and the
Subsidiaries Subordination Agreement in the form of Exhibit D(2) attached
------------
hereto, dated the date hereof, by and among Borrower, each of its Subsidiaries,
Lender and the Senior Lenders, as each such agreement may be amended, modified,
or supplemented from time to time in accordance with the terms thereof.
"Subsidiary" shall mean, with respect to any Person, any corporation,
----------
partnership, limited liability company, 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 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 partnership, limited liability
company, 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 partnership, limited liability
company, association or other business entity if such Person or Persons shall be
allocated a majority of partnership, limited liability company,
-10-
<PAGE>
association or other business entity gains or losses or shall be or control the
managing director or general partner of such partnership, limited liability
company, association or other business entity. For purposes of this Agreement,
if the context does not otherwise indicate in respect of which Person the term
"Subsidiary" is used, the term "Subsidiary" shall refer to a Subsidiary of
Borrower.
"UCC" shall mean the Uniform Commercial Code as in effect in any
---
applicable jurisdiction.
"Wholly Owned Subsidiary" shall mean, with respect to any Person, a
-----------------------
Subsidiary of which all of the outstanding capital stock or other ownership
interests is owned by such Person either directly or through other Wholly Owned
Subsidiaries.
1.02 Accounting Principles. Except as otherwise provided in this
---------------------
Agreement, all computations and determinations as to accounting or financial
matters shall be made in accordance with GAAP, and all accounting or financial
terms shall have the meanings ascribed to such terms by GAAP as in effect on the
date hereof. All financial statements to be delivered pursuant to this
Agreement shall be prepared in accordance with GAAP. All financial covenants
are to be calculated in accordance with GAAP as in effect on the date hereof
unless such modifications are agreed to by the parties hereto. Notwithstanding
the foregoing, if any changes in accounting principles from those used in the
preparation of the financial statements referred to in Section 5.03 hereafter
occasioned by the promulgation of rules, regulations, pronouncements or opinions
by or required by the Financial Accounting Standards Board or the American
Institute of Certified Public Accountants (or successors thereto or agencies
with similar functions) result in a change in the method of calculation of
financial covenants, standards or terms found in Articles I, III and V hereof,
the parties hereto agree to enter into negotiations in order to amend such
provisions so as to equitably reflect such changes with the desired result that
the criteria for evaluating Borrower's financial condition shall be the same
after such changes as if such changes had not been made.
ARTICLE II
THE CREDIT
----------
2.01 Subordinated Loan. Subject to the terms and conditions of this
-----------------
Agreement and relying upon the representations, warranties, and covenants of
Borrower set forth herein, Lender shall, simultaneously with the Closing on the
date hereof, make a term loan (the "Subordinated Loan") to Borrower in the
-----------------
aggregate principal amount of $37,000,000 (which loan shall be made at a
discount, with $32,100,000 being advanced hereunder at the Closing with respect
to the Subordinated Loan). Except as otherwise expressly provided herein, for
the purposes of this Agreement, the term "Loan" or the "Subordinated Loan" shall
---- -----------------
refer to the outstanding principal amount of the Subordinated Note.
2.02 The Subordinated Note; Repayment of Principal. The obligation of
---------------------------------------------
Borrower to repay the aggregate unpaid principal amount of the Subordinated Loan
shall be evidenced by a promissory note of Borrower in the form attached hereto
as Exhibit A representing Borrower's obligation to pay $37,000,000 in principal
---------
(the "Subordinated Note"), dated the date hereof, payable as specified in
-----------------
Section 2.05 hereof to the order of Lender, and bearing interest and maturing as
-11-
<PAGE>
provided in this Agreement. Borrower shall repay the Subordinated Loan in the
following amounts (or such lesser amount then outstanding) payable on each
corresponding Semi-Annual Payment Date as set forth in the following table:
<TABLE>
<CAPTION>
Semi-Annual
Payment Date in: Payment Amount
--------------- --------------
<S> <C> <C>
October 2008 $9,250,000
April 2009 $9,250,000
October 2009 $9,250,000
April 2010 $9,250,000
</TABLE>
Notwithstanding the foregoing, (i) if the final maturity of the Senior Debt is
extended beyond April 30, 2008, then the principal payment dates for the
Subordinated Loan shall be changed to be the four dates that are the last
Business Day in each of the sixth, twelfth, eighteenth, and twenty-fourth
calendar months immediately following the calendar month containing such final
maturity date, and (ii) if the Senior Debt is paid in full in cash prior to
April 30, 2008, the principal payment dates for the Subordinated Loan shall be
changed to be the four dates that are the last Business Day in each of the
sixth, twelfth, eighteenth, and twenty-fourth calendar months immediately
following the calendar month in which the Senior Debt is paid in full in cash.
2.03 Interest.
--------
(a) Interest Rates; Payments. Interest shall accrue on the
------------------------
outstanding unpaid principal amount of the Subordinated Loan at the rate of
12.5% per annum (computed for the actual number of days elapsed on the basis of
a 360-day year), and all accrued interest on the Loan shall be due and payable
quarterly in arrears on each Quarterly Payment Date, beginning with the
Quarterly Payment Date in December 1998. In addition, all accrued and unpaid
interest on the Loan shall be paid upon the payment in full of the entire
outstanding principal amount of the Loan and, if payment in full is not made
when due, thereafter on demand.
(b) Additional Interest. After the occurrence of and during the
-------------------
continuance of any Event of Default under Section 6.01 of this Agreement, the
outstanding principal amount of the Loans and, to the extent permitted by
applicable law, all accrued and unpaid interest thereon and all other amounts,
fees and obligations then due and payable to Lender under this Agreement shall
bear interest at the rate of 15% per annum (computed for the actual number of
days elapsed on the basis of a 360-day year), and such interest shall be payable
on demand.
(c) Saving Clause. Notwithstanding any other provision contained in
-------------
this Agreement or the Subordinated Note, the aggregate interest rate per annum
charged with respect to the Loan hereunder (including all charges and fees
deemed to be interest pursuant to applicable law) shall not exceed the maximum
rate per annum permitted by applicable law. In the event that the aggregate
interest rate per annum payable with respect to the Loan (including all charges
and fees deemed to be interest under applicable laws) exceeds the maximum legal
rate, (i) Borrower shall
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<PAGE>
only pay Lender interest at the maximum permitted rate, (ii) Borrower shall
continue to make such interest payments at the maximum permitted rate until all
such interest payments and other charges and fees payable hereunder (in the
absence of such legal limitations) have been paid in full, (iii) any interest in
excess of the maximum permitted rate received by Lender shall, at Lender's
option, be applied to a prepayment of principal of the Loan or refunded to
Borrower and (iv) neither Borrower nor any other party shall have any right of
action against Lender for any damages or penalty arising out of the payment or
collection of any such excess interest.
2.04 Prepayment of Subordinated Loan.
-------------------------------
(a) Optional Prepayments of the Loan. Borrower shall have the right,
--------------------------------
at its option, to prepay the Subordinated Loan in whole at any time or in part
from time to time, without premium or penalty; provided that (i) any such
--------
partial prepayments of the Loan on any one day shall be in an aggregate
principal amount which is equal to $100,000 or an integral multiple of $100,000
(or if the outstanding principal amount is less than $100,000, such lesser
amount), (ii) Borrower shall not make more than one prepayment of the Loan under
this Section 2.04(a) during any fiscal quarter without the prior consent of
Lender (unless such second prepayment represents payment in full of the Loan)
and (iii) either (x) all obligations constituting Senior Debt shall have been
paid in full in cash and all obligations to make any extensions of credit under
the Senior Loan Agreement that would constitute Senior Debt shall have been
terminated or (y) the Senior Lenders shall have consented to such prepayment.
(b) Required Excess Cash Flow Prepayments. Within 15 days after the
-------------------------------------
issuance of Borrower's audited consolidated financial statements for each fiscal
year commencing with the fiscal year ending on August 31, 1999 (but in any event
within 105 days after the end of each such fiscal year), Borrower shall prepay a
portion of the Loan, without premium or penalty, equal to 60% of such fiscal
year's Excess Cash Flow in accordance with Section 2.04(d); provided that
--------
Borrower shall not be required to make, and Lender shall have no right to
receive or retain, any such prepayment until all obligations constituting Senior
Debt have been paid in full in cash and all obligations to make any extensions
of credit under the Senior Loan Agreement that would constitute Senior Debt have
been terminated, and then Borrower shall be required to make such prepayment
only to the extent such Excess Cash Flow has not been used to repay such Senior
Debt.
(c) Other Required Prepayments.
--------------------------
(i) Borrower shall use all of the proceeds (net of reasonable selling
expenses, estimated taxes and any amounts applied to repay Indebtedness secured
by such assets) from any sale or other disposition or related series of sales or
other dispositions (other than sales of inventory in the ordinary course of
business, or intercompany sales permitted under Section 5.02(d)(i)) of more than
10% of Borrower's consolidated assets (computed on a consolidated basis either
according to net book value, determined in accordance with GAAP consistently
applied, or fair market value, determined by Borrower's Board of Directors in
its reasonable good faith judgment) to prepay the Loan, without premium or
penalty, in accordance with Section 2.04(d), except to the extent such proceeds
are reinvested in accordance with Section 5.02(d)(ii) hereof; provided that
--------
Borrower shall not be required to make, and Lender shall have no right to
receive or retain, any such prepayment until all obligations constituting Senior
Debt have been paid in full in cash and all obligations to
-13-
<PAGE>
make any extensions of credit under the Senior Loan Agreement that would
constitute Senior Debt have been terminated, and then Borrower shall be required
to make such prepayment only to the extent such proceeds have not been used to
repay such Senior Debt.
(ii) The entire outstanding principal amount of the Loan shall be
immediately due and payable (without premium or penalty) upon the sale or other
disposition (other than intercompany sales permitted under Section 5.02(d)(i)),
in one transaction or a series of related transactions, of more than 50% of
Borrower's consolidated assets (computed on a consolidated basis either
according to net book value, determined in accordance with GAAP consistently
applied, or fair market value, determined by Borrower's Board of Directors in
its reasonable good faith judgment) or upon the consummation of a Change in
Ownership; provided that Borrower shall not be required to make, and Lender
--------
shall have no right to receive or retain, any such prepayment until all
obligations constituting Senior Debt have been paid in full in cash and all
obligations to make any extensions of credit under the Senior Loan Agreement
that would constitute Senior Debt have been terminated.
(iii) Except as otherwise provided herein, all such prepayments of
the Loan under this Section 2.04(c) shall be made promptly (but in any event
within five Business Days) after the consummation of the particular event or
transaction. Concurrently with any prepayment under Section 2.04(b) or (c)(i),
Borrower shall deliver to Lender a certificate of its chief financial officer
showing the calculation of the amount of such prepayment.
(d) Application of Prepayments of Loan. Each prepayment of the Loan
----------------------------------
shall be applied to reduce the remaining scheduled principal payments under
Section 2.02 in inverse order of the maturity thereof. Borrower shall give
notice (which shall be irrevocable) to Lender of each payment not later than
12:00 noon, New York time, on the second Business Day preceding the date of
payment, specifying the aggregate principal amount to be prepaid and the payment
date. Once any such notice has been given, the principal amount specified in
such notice, together with interest on the amount of each such prepayment to the
date of payment, shall become due and payable on such date of payment.
2.05 Payments.
--------
(a) Place and Manner of Payments. All payments and prepayments to be
----------------------------
made to Lender in respect of principal or interest on the Loan and other fees
and charges under this Agreement shall become due at 12:00 noon, New York time,
and shall be made to the account of Lender at State Street Bank & Trust Company,
Boston, Massachusetts, ABA Number 011-000-028, Beneficiary Account Number 2426-
505-0, Account Title: State Board of Administration of Florida, (Attn.: Greg
Talbot) for credit to SBA/Liberty Partners Fund, Fund Number SM29 (FBO
Department-Public Funds) or at any other payment office in the United States
previously designated by Lender to Borrower in writing, on the day when due, in
lawful money of the United States of America and in funds immediately available
at such payment office. Any funds not received by 12:00 noon, New York time
shall be deemed to have been paid by Borrower on the next succeeding Business
Day. Lender or any other holder of the Subordinated Note is hereby authorized to
endorse on the notes held by it an appropriate notation evidencing each
scheduled payment and each prepayment of principal and each payment of interest;
provided that the failure to make any such
- --------
-14-
<PAGE>
notation or any error with respect thereto shall not limit, expand or otherwise
affect the obligations of Borrower under any such note and payments of principal
and interest on such note shall not be affected by the failure to make any such
notation.
(b) Application of Payments. Unless otherwise directed by Lender in
-----------------------
its sole discretion, payments made by Borrower shall be applied (i) first, to
reimburse Lender for expenses and fees incurred for which Borrower is obligated
to pay Lender under and in accordance with this Agreement (including, without
limitation, reasonable attorneys' fees and other legal expenses), (ii) second,
to satisfaction of all amounts due and payable to Lender hereunder and under the
Subordinated Note, other than expenses and fees repaid in accordance with (i)
above, and (iii) third, the balance, if any, to Borrower or as otherwise
required by law. All payments hereunder and under the Subordinated Note shall
be made without setoff, offset, deduction or counterclaim, free and clear of all
taxes, levies, imports, duties, fees and charges, and without any withholding,
restriction or conditions imposed by any governmental authority. If Borrower
shall be required by any law to deduct, setoff or withhold any amount from or in
respect of any payment to Lender hereunder or under the Subordinated Note, then
the amount so payable to Lender shall be increased as may be necessary so that,
after making all required deductions, setoffs and withholdings, Lender shall
receive an amount equal to the sum it would have received had no such
deductions, setoffs or withholding been made.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower hereby makes the following representations and warranties,
which shall survive the execution and delivery of this Agreement and the
issuance of the Subordinated Note hereunder:
3.01 Organization and Qualification. Borrower and each of its
------------------------------
Subsidiaries is a corporation or other entity duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization and is
duly qualified to do business as a foreign corporation in every jurisdiction in
which the failure to qualify has had or would reasonably be expected to have a
Material Adverse Effect. Borrower and each of its Subsidiaries possesses all
material licenses, permits and authorizations necessary to own and operate its
properties, to carry on its businesses as now being conducted and as presently
proposed to be conducted and to carry out the transactions contemplated by this
Agreement. Borrower has provided Lender with true, correct and complete copies
of the articles or certificate of incorporation and bylaws of Borrower and each
of its Subsidiaries, which reflect all amendments made thereto at any time prior
to the date of this Agreement.
3.02 Corporate Power. Borrower has the requisite corporate power and
---------------
authority to execute, deliver and perform (as the case may be) this Agreement,
the Subordinated Note, the Merger Agreement, the Stock and Warrant Purchase
Agreement, the Senior Loan Agreement, the Senior Notes and the other Senior Loan
Documents, the Subordination Agreements and all other instruments, documents and
agreements contemplated or required by the provisions of this Agreement and to
be executed, delivered or performed by it hereunder; and each Subsidiary of
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<PAGE>
Borrower has the requisite corporate power and authority to execute, deliver and
perform the Subsidiary Guaranty. Borrower and each of its Subsidiaries has all
requisite corporate power and authority under the laws of its jurisdiction of
incorporation to own and operate its properties and to carry on its businesses
as now conducted and as presently proposed to be conducted.
3.03 Subsidiaries; Investments; Partnerships. Except as set forth on
---------------------------------------
the Disclosure Schedule, Borrower does not own any shares of stock or any other
-------------------
security or interest in any other Person. Except as set forth on the Disclosure
----------
Schedule, all of the issued and outstanding shares of stock or other security or
- --------
interest in each Subsidiary of Borrower is owned beneficially and of record,
directly or indirectly, by Borrower, free and clear of any Lien (other than
pursuant to the Senior Loan Agreement and the other Senior Loan Documents), and
is not subject to any option or right to purchase any such security or interest,
and all of the outstanding stock of or other security or interest in each such
Subsidiary of Borrower is validly issued, fully paid and nonassessable. Except
as set forth on the Disclosure Schedule, none of Borrower or any of its
-------------------
Subsidiaries is a partner in any partnership or a member of any limited
liability company.
3.04 Conflict with Other Instruments. The execution and delivery by
-------------------------------
Borrower of this Agreement, the Subordinated Note, the Senior Loan Agreement,
the Senior Notes and the other Senior Loan Documents, the Subordination
Agreements, the Merger Agreement, the Stock and Warrant Purchase Agreement and
the other instruments, documents and agreements contemplated or required hereby
or thereby, and by each of the Borrower's Subsidiaries of the Subordinated
Guaranty, and the consummation of the transactions herein and therein
contemplated to be consummated by Borrower or any of its Subsidiaries, and
compliance by Borrower and each of its Subsidiaries with the terms, conditions
and provisions hereof and thereof, do not and shall not (i) conflict with or
result in a breach of any of the terms, conditions or provisions of, (ii)
constitute a default under, (iii) result in the creation of any Lien upon
Borrower's or any Subsidiary's capital stock or assets pursuant to, (iv) give
any third party the right to modify, terminate or accelerate any obligation
under, or (v) result in a violation of, the articles or certificate of
incorporation or bylaws of Borrower or any of its Subsidiaries, or any law
(including any usury laws applicable to the Loan), statute, rule, regulation,
order, writ, injunction or decree of any court or administrative or governmental
body or agency to which Borrower or any of its Subsidiaries is subject, or any
material agreement or instrument to which Borrower or any of its Subsidiaries is
a party or by which any of them or any of their properties is bound, except (A)
as contemplated by and pursuant to the Senior Loan Documents, (B) which would
not (either individually or in the aggregate) have a Material Adverse Effect or
(C) as set forth on the Disclosure Schedule, all of which items listed on the
Disclosure Schedule shall be duly waived or amended prior to the making of the
- -------------------
Loan hereunder so as to eliminate any such conflict, breach, violation, default
or Lien.
3.05 Authorization, Governmental Approvals. The execution and delivery
-------------------------------------
of this Agreement, the borrowings contemplated by the provisions hereof, the
execution, issuance and delivery of the Subordinated Note to evidence such
borrowings, the execution and delivery of the Senior Loan Agreement, the Senior
Notes and the other Senior Loan Documents, the Subordination Agreements, the
Merger Agreement, the Stock and Warrant Purchase Agreement and all other
instruments, documents and agreements contemplated or required by the provisions
hereof or thereof to be executed and delivered by Borrower, and of the
Subordinated Guaranty by the Borrower's Subsidiaries, and the consummation by
Borrower and each of its Subsidiaries of the transactions
-16-
<PAGE>
herein and therein contemplated to be consummated by Borrower and each of its
Subsidiaries have been duly authorized by all necessary corporate action on the
part of Borrower and each of its Subsidiaries. Except as set forth on the
Disclosure Schedule, no authorization, consent, approval, license or exemption
- -------------------
of, and no registration, qualification, designation, declaration or filing with,
any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, and no vote, authorization, consent or
approval of shareholders of Borrower or any of its Subsidiaries, is or was
necessary to (a) the valid execution and delivery of this Agreement by Borrower,
(b) the borrowings contemplated by the provisions hereof, (c) the execution,
issuance and delivery by Borrower of the Subordinated Note to evidence such
borrowings, (d) the execution and delivery by Borrower of the Senior Loan
Agreement, the other Senior Loan Documents, the Subordination Agreements, the
Merger Agreement, the Stock and Warrant Purchase Agreement and all other
instruments, documents and agreements contemplated or required by the provisions
hereof or thereof and to be executed and delivered by Borrower and by each of
Borrower's Subsidiaries of the Subordinated Guaranty or (e) the consummation by
Borrower of the transactions herein and therein contemplated to be consummated
by Borrower, all of which items listed on the Disclosure Schedule shall be duly
-------------------
obtained or made prior to the making of the Loans hereunder.
3.06 Validity and Binding Effect. This Agreement, the Subordinated
---------------------------
Note, the Senior Loan Agreement, the other Senior Loan Documents, the
Subordination Agreements, the Merger Agreement, the Stock and Warrant Purchase
Agreement and all other instruments and agreements contemplated hereby or
thereby to which Borrower is a party have been duly and validly executed and
delivered by Borrower and constitute legal, valid and binding obligations of
Borrower, and all such obligations of Borrower are enforceable in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, similar laws affecting creditors' rights
generally or general principles of equity. The Subordinated Guaranty and all
other instruments and agreements contemplated hereby or thereby to which each
Subsidiary of Borrower is a party have been duly and validly executed and
delivered by each Subsidiary of Borrower and constitute legal, valid and binding
obligations of Borrower, and all such obligations of each Subsidiary of Borrower
are enforceable in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization, similar
laws affecting creditors' rights generally or general principles of equity.
3.07 No Event of Default; Compliance with Agreements. No event has
-----------------------------------------------
occurred and no condition exists which would constitute an Event of Default or a
Potential Event of Default. Except as set forth on the Disclosure Schedule or
-------------------
except as would not (either individually or in the aggregate) have a Material
Adverse Effect, none of Borrower or any of its Subsidiaries is in violation of
any term of its certificate or articles of incorporation or bylaws, any term of
any order, writ, injunction or decree of any court or administrative or
governmental body or agency to which it is subject, or any term of any
agreement, instrument, contract or commitment to which it is a party or by which
it or any of its properties may be bound.
3.08 Solvency, etc. Borrower is solvent as of the date of this
--------------
Agreement and shall not become insolvent as a result of the consummation of the
transactions contemplated by this Agreement (including, without limitation, the
consummation of the Merger and the incurrence of the Loan hereunder and the
loans under the Senior Loan Agreement). Borrower is, and after giving effect to
the transactions contemplated by this Agreement shall be, able to pay its debts
as they
-17-
<PAGE>
become due, and Borrower's property now has, and after giving effect to the
transactions contemplated hereby shall have, a fair salable value greater than
the amounts required to pay its debts (including a reasonable estimate of the
amount of all contingent liabilities). Borrower has adequate capital to carry on
its business, and after giving effect to the transactions contemplated by this
Agreement, Borrower shall have adequate capital to conduct its business. No
transfer of property is being made and no obligation is being incurred in
connection with the transactions contemplated by this Agreement with the intent
to hinder, delay or defraud either present or future creditors of Borrower.
3.09 Margin Regulations. None of Borrower or any of its Subsidiaries
------------------
owns any "margin security," as the term is used in Regulations T, U or X of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
---------------------
and none of the proceeds of the Loan will be used, directly or indirectly, for
the purpose of purchasing or carrying any margin security, for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might cause any of
the securities purchased under this Agreement to be considered "purpose credit"
within the meaning of Regulations T, U or X of the Federal Reserve Board. None
of Borrower or any of its Subsidiaries has taken or permitted, or will permit
any agent acting on its behalf to take, any action which might cause this
Agreement or any document or instrument delivered hereunder to violate such
Regulations T, U or X or any other regulation of the Federal Reserve Board. The
making of the Loan hereunder will not constitute a violation of such Regulations
T, U or X.
3.10 Investment Company; Public Utility Holding Company. None of
--------------------------------------------------
Borrower or any of its Subsidiaries is an "investment company" or an "affiliated
person" of an "investment company" within the meaning of the Investment Company
Act of 1940, as amended. None of Borrower or any of its Subsidiaries is a
"holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended. Borrower is not subject to any other law or governmental regulation
(other than Regulation X of the Federal Reserve Board) limiting its ability to
incur indebtedness for borrowed money.
3.11 Merger Agreement. The Merger Agreement has been duly executed
----------------
and delivered by each of the parties thereto and is in full force and effect,
there has been no material amendment or modification thereof, and there are no
uncured breaches or defaults on the part of any party thereunder. The
representations and warranties made by Borrower in the Merger Agreement are true
and correct as of the date of this Agreement, shall be true and correct as of
the issuance of the Subordinated Note hereunder and shall be incorporated herein
and made by Borrower hereunder. The Merger has been duly consummated as
contemplated in the Merger Agreement without waiver by any party of any material
condition (other than the waiver by the parties of the condition relating to the
Financing (as that term is defined in the Merger Agreement)). Notwithstanding
anything to the contrary contained in the Merger Agreement, the representations
and warranties referred to in this Section 3.11 shall survive the execution and
delivery of this Agreement, the issuance of the Subordinated Note hereunder and
the consummation of the Merger. Newco was formed for the purposes of
consummating the transactions contemplated by the Merger Agreement. Prior to
the Merger, Newco had no assets or liabilities and conducted no business, except
for assets to facilitate such transactions.
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<PAGE>
3.12 Stock and Warrant Purchase Agreement. The Stock and Warrant
------------------------------------
Purchase Agreement has been duly executed and delivered by Borrower and is in
full force and effect, there has been no material amendment or modification
thereof, and there are no uncured breaches or defaults on the part of any party
thereunder. The representations and warranties made by Borrower in the Stock
and Warrant Purchase Agreement are true and correct as of the date of this
Agreement and shall be true and correct as of the issuance of the Subordinated
Note hereunder and shall be deemed incorporated herein and made by Borrower
hereunder.
3.13 Subordination Agreements. The Subordination Agreements have been
------------------------
duly executed and delivered by each of the parties thereto (excluding, for
purposes of this representation, Lender) and are in full force and effect.
There has been no material amendment or modification of such agreements, and
there are no uncured breaches or defaults on the part of any party thereunder.
3.14 Disclosure. Neither this Agreement nor any other agreement,
----------
document or certificate, when furnished to Lender by or on behalf of Borrower in
connection with the transactions contemplated hereby, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading. There
is no fact known to Borrower (other than general economic conditions which are a
matter of public knowledge) that could reasonably be expected to have a Material
Adverse Effect that has not been set forth in this Agreement or the Disclosure
----------
Schedule or otherwise expressly disclosed in writing to Lender on or prior to
- --------
the date of this Agreement.
3.15 Closing Date. The representations and warranties of Borrower
------------
contained in this Article III and elsewhere in this Agreement and all
information contained in any exhibit, schedule or attachment hereto or in any
certificate or other writing delivered by, or on behalf of, Borrower to the
Lender shall be correct and complete in all material respects on the date hereof
as though made after giving effect to the Merger and the other transactions
contemplated hereby to occur on the date hereof.
ARTICLE IV
CONDITIONS PRECEDENT
--------------------
4.01 Conditions to Loans. The obligation of Lender to make the Loan
-------------------
is subject to the conditions set forth below being satisfied as of the time of
the making of the Loan hereunder:
(a) The representations and warranties contained in this Agreement
shall be true and correct in all material respects as of the date of the Loan as
though then made, and Borrower shall have performed all obligations to be
performed by it hereunder on or before the date of the Loan hereunder
(including, without limitation, the simultaneous consummation of the
transactions under the Merger Agreement, the Senior Loan Agreement and the Stock
and Warrant Purchase Agreement).
(b) There shall be delivered to Lender:
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<PAGE>
(i) An opinion of Hughes & Luce, LLP, counsel to the Borrower,
and Blank Rome Comisky & McCauley LLP, counsel to FPK, as applicable, in
the form attached hereto as Exhibit C;
---------
(ii) Duly completed and executed originals of the Subordinated
Note, the Subordinated Guaranty and the Subordination Agreements;
(iii) Certified copies of all documents evidencing corporate
action taken by Borrower with respect to this Agreement and the
Subordinated Note to be issued hereunder, the Senior Loan Agreement and the
Senior Notes issued thereunder, the other Senior Loan Documents, the
Subordination Agreements, the Stock and Warrant Purchase Agreement and the
Merger Agreement, in form and substance satisfactory to Lender and its
counsel;
(iv) A certificate executed on behalf of Borrower certifying
that the conditions in Section 4.01(a) and (c) through (j), inclusive, have
been fully satisfied at the time of the making of the Loan hereunder;
(v) A certificate or certificates, signed by the secretary or
an assistant secretary of Borrower, certifying as to (A) the names of the
respective officers of Borrower authorized to sign this Agreement, the
Subordination Agreements, the Subordinated Note and the other documents
delivered hereunder or thereunder by Borrower, (B) the names of the
respective officers of each of Buyer's Subsidiaries authorized to sign the
Subordinated Guaranty, and (C) specimens of the true signatures of all such
officers, on which Lender may conclusively rely until a revised certificate
is similarly so delivered;
(vi) A certificate signed by Borrower's chief executive officer
and the chief financial officer regarding the reasonableness of Borrower's
projections and the matters set forth in Section 3.08 (Solvency, etc.), in
form and substance satisfactory to Lender and its counsel;
(vii) Copies of all third party and governmental consents,
approvals and filings required in connection with the consummation of the
transactions contemplated under this Agreement, the Merger Agreement and
the other agreements described herein and therein;
(viii) Evidence satisfactory to the Lender of the payment in
full of any and all Indebtedness or other related obligations owing or owed
by Borrower or any of its Subsidiaries (other than Indebtedness permitted
under Section 5.02(a) hereof ), the entire amount of which will be paid
contemporaneously with the Closing, and the termination of all agreements
evidencing such Indebtedness and the release of all Liens securing any such
Indebtedness;
(ix) Evidence of insurance coverage regarding Borrower,
satisfactory in terms, amount and scope and provided by insurers all
reasonably satisfactory to the Lender;
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<PAGE>
(x) Duly completed and executed copies of the Merger
Agreement, the Senior Loan Agreement, the Senior Notes, the other Senior
Loan Documents, the Stock and Warrant Purchase Agreement, and the fee
letter agreement described in Section 4.01(i) below;
(xi) Certified copies of the articles or certificate of
incorporation and bylaws of Borrower and each of its Subsidiaries;
(xii) Good standing certificates for the jurisdiction of
incorporation of Borrower and each of its Subsidiaries, and for each
jurisdiction in which Borrower or any of its Subsidiaries is qualified to
do business; and
(xiii) Such other instruments, documents and certificates as
Lender may require.
(c) The Senior Loan Agreement, the Senior Notes and the other Senior
Loan Documents shall be satisfactory to Lender without amendment or modification
thereof, and shall be in full force and effect, all conditions to the
obligations of the Senior Lenders to make loans thereunder shall have been
satisfied in full (without waiver thereof), and the Senior Lenders shall have
advanced to the Borrower all amounts under the Senior Term Loan and not more
than $2.0 million under the Senior Revolving Loan.
(d) The Stock and Warrant Purchase Agreement and all other documents
and agreements contemplated thereby shall have been duly authorized, executed,
and delivered by Borrower and shall be in full force and effect, all conditions
to the obligations of the parties thereto shall have been satisfied in full
(without waiver thereof) and the transactions contemplated thereby shall have
been consummated in accordance with the terms thereof.
(e) The Merger Agreement shall be in form and substance satisfactory
to the Lender, without amendment or modification thereof, and shall be in full
force and effect, all conditions to the obligations of the parties thereto shall
have been satisfied in full (without waiver thereof), and the Merger shall have
been consummated in accordance with the terms of the Merger Agreement (without
any waiver or amendment of any material provision thereof by any party (other
than the waiver by the parties of the condition relating to the Financing (as
that term is defined in the Merger Agreement)). In connection with the
consummation of the Merger, the Borrower shall have received aggregate gross
proceeds of at least $22.0 million from the issuance of Common Stock to the
Buyout Group and other third parties (other than Liberty) pursuant to
agreements, and terms and conditions thereunder, in form and substance
reasonably satisfactory to Lender.
(f) Each of the Subordination Agreements (in the form of Exhibit D(1)
------------
and Exhibit D(2) attached hereto) and the Subordinated Guaranty (in the form of
------------
Exhibit E attached hereto) shall have been duly authorized, executed and
- ---------
delivered by each party thereto (excluding, for purposes of this condition,
Lender) and shall be in full force and effect.
(g) Since August 30, 1997, there shall not have occurred any Material
Adverse Effect or any condition or event that in the reasonable judgment of the
Lender could be expected to
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<PAGE>
result (either individually or in the aggregate) in a Material Adverse Effect
(both before and after giving effect to the Merger and the other transactions
contemplated hereby), and no Event of Default or Potential Event of Default
shall have occurred or shall exist.
(h) Borrower shall have paid all fees and expenses required to be
paid pursuant to Section 8.03 hereof; and Borrower shall have duly authorized,
executed and delivered a fee letter agreement dated the date hereof between the
Borrower and Liberty Partners, L.P., in form and substance satisfactory to
Lender, and Borrower shall have paid to Liberty Partners, L.P. all fees to be
paid thereunder prior to the making of the Loan;
(i) All Indebtedness of Borrower outstanding immediately prior to the
making of the Loan hereunder (other than Indebtedness permitted under Section
5.02(a) hereof) shall be paid in full, and all Liens securing such Indebtedness
shall be fully released and terminated.
(j) Borrower shall have obtained all third party and governmental
consents, approvals and filings required in connection with the consummation of
the transactions contemplated under this Agreement, the Merger Agreement and the
other agreements described herein and therein.
ARTICLE V
COVENANTS
---------
5.01 Affirmative Covenants. Borrower covenants that, until the
---------------------
payment in full of the Loan and all accrued interest thereon (including all
interest accruing after the commencement of any bankruptcy or reorganization
proceeding at the rate or rates provided herein) and all other fees, amounts and
obligations outstanding or payable to Lender (or reasonably expected by Lender
to become payable) hereunder and under the Subordinated Note, it shall:
(a) Preservation of Corporate Existence, etc. Preserve and maintain,
-----------------------------------------
and cause each of its Subsidiaries to preserve and maintain, its corporate
existence, all of its material rights, franchises and privileges in the
jurisdiction of its incorporation, and all material licenses, authorizations,
orders, permits and other governmental approvals necessary to the conduct of its
businesses, and qualify and remain qualified, and cause each of its Subsidiaries
to qualify and remain qualified, as a foreign corporation in each jurisdiction
in which failure to qualify would (either individually or in the aggregate) have
a Material Adverse Effect; provided, however, that nothing in this paragraph
-------- -------
shall prohibit any transaction expressly permitted under Sections 5.02(e)
(Mergers, etc.) or 5.02(g) (certain capital stock matters).
(b) Payment of Taxes. Pay and discharge, and cause each of its
----------------
Subsidiaries to pay and discharge, when payable all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits or
upon any properties belonging to it (in each case prior to the date on which
penalties accrue thereon), and all lawful claims which, if unpaid, would become
a Lien upon any properties of Borrower or any of its Subsidiaries, unless and to
the extent that (A) the failure to so pay or discharge would not (either
individually or in the aggregate) have a Material Adverse Effect or (B) the same
are being contested in good faith and by appropriate proceedings and
-22-
<PAGE>
adequate reserves or other provisions (as determined in accordance with GAAP
consistently applied) have been made and recorded on Borrower's financial
records with respect thereto.
(c) Maintenance of Insurance. Maintain, and cause each of its
------------------------
Subsidiaries to maintain, insurance on its properties and businesses with
financially sound and reputable insurance companies in such amounts, of such
types and covering such casualties, risks and contingencies as is ordinarily
carried by companies engaged in similar businesses and owning similar properties
in the same general locations in which Borrower and its Subsidiaries operate.
(d) Maintenance of Properties. Maintain and preserve, and cause each
-------------------------
of its Subsidiaries to maintain and preserve, all of its properties used or
usable in its businesses in good repair, working order and condition (ordinary
wear and tear excepted), except to the extent that the failure to do so with
respect to any such property would not (either individually or in the aggregate)
have a Material Adverse Effect.
(e) Keeping of Records and Books of Account. Keep, and cause each of
---------------------------------------
its Subsidiaries to keep, proper records and books of account which present
fairly in all material respects the financial condition, results of operations
and financial transactions of Borrower and its Subsidiaries, and to make
provisions on its financial statements for all such proper reserves as in each
case are required in accordance with GAAP, consistently applied.
(f) Visitation Rights. Permit Lender or any agents or representatives
-----------------
of Lender, upon reasonable notice and during normal business hours and at such
other times as Lender may reasonably request, to (i) visit and inspect any of
the properties of Borrower and its Subsidiaries, (ii) examine the corporate and
financial records of Borrower and its Subsidiaries and make copies thereof or
extracts therefrom and (iii) discuss the affairs, finances and accounts of
Borrower and its Subsidiaries with the directors, officers, key employees and
independent accountants of Borrower and its Subsidiaries (and the presentation
of an executed copy of this Agreement (or photocopy thereof) by Lender or any
agent or representative thereof to such independent accountants shall constitute
Borrower's permission to such independent accountants to participate in
discussions with such Persons, regardless of whether any such agent or
representative is a party to this Agreement); provided that Lender or such agent
--------
or representative shall give reasonable notice to Borrower prior to any contact
with such accountants and give Borrower the opportunity to participate in such
discussions.
(g) Compliance with Laws. Comply, and cause each of its Subsidiaries
--------------------
to comply, with the applicable requirements of all laws, rules, regulations and
orders of all governmental authorities (including, but not limited to, ERISA and
the rules, regulations and orders promulgated thereunder), the violation of
which would (either individually or in the aggregate) have a Material Adverse
Effect.
(h) Compliance with Agreements. Comply, and cause each of its
--------------------------
Subsidiaries to comply, with all other obligations that it incurs pursuant to
any contract or agreement, whether oral or written, express or implied, as such
obligations become due, unless and to the extent that (A) the failure to so
comply would not (either individually or in the aggregate) have a Material
Adverse Effect or (B) the same are being contested in good faith and by
appropriate proceedings and adequate
-23-
<PAGE>
reserves or other provisions (as determined in accordance with GAAP consistently
applied) have been made and recorded on Borrower's financial records with
respect thereto;
(i) Environmental Compliance.
------------------------
(i) Comply, and cause its Subsidiaries to comply, at all times
with all applicable Environmental Laws, unless failure to so comply would not
(either individually or in the aggregate) have a Material Adverse Effect.
(ii) Promptly take, and cause its Subsidiaries to promptly take,
any and all necessary remedial actions in response to the presence, storage,
use, disposal, transportation, release or discharge of any Hazardous Materials
on, under or about any real property owned, leased or operated by Borrower or
any Subsidiary in order to comply in with all Environmental Laws (unless failure
to do so would not (either individually or in the aggregate) have a Material
Adverse Effect), and in the event any Borrower or any of its Subsidiaries
undertakes any remedial action with respect to any Hazardous Material on, under
or about any real property owned, leased or operated by any Borrower or any of
its Subsidiaries, diligently conduct and complete, and cause its Subsidiaries to
diligently conduct and complete, such remedial action in compliance with all
applicable Environmental Laws, and in accordance with the policies, orders and
directives of all federal, state, local and foreign governmental authorities,
except to the extent that (A) failure to so comply would not (either
individually or in the aggregate) have a Material Adverse Effect or (B)
Borrower's or its Subsidiary's liability for such presence, storage, use,
disposal, transportation, release or discharge of any Hazardous Material is
being contested in good faith and by appropriate proceedings and adequate
reserves or other provisions (as determined in accordance with GAAP consistently
applied) have been made and recorded on Borrower's financial records with
respect thereto.
(iii) If Lender at any time has reason to believe that there may be
a material violation of any Environmental Law by, or any material liability
arising thereunder of, Borrower or any of its Subsidiaries or related to any
real property owned, leased or operated by Borrower or any of its Subsidiaries
or real property adjacent to any such real property, provide Lender with such
reports, certificates, engineering studies and other written material or data as
Lender may reasonably require so as to satisfy Lender that Borrower and its
Subsidiaries are in material compliance with all applicable Environmental Laws.
(j) Maximum Leverage Ratio. Subject to Section 7.02(c), not permit
----------------------
the Leverage Ratio at the end of any Measurement Period ending during any period
set forth below to exceed the ratio set forth opposite such date below:
<TABLE>
<CAPTION>
==================================================================
Period Leverage Ratio
==================================================================
<S> <C>
Closing Date to February 28, 1999 6.900:1.0
------------------------------------------------------------------
March 1, 1999 to May 31, 1999 6.600:1.0
------------------------------------------------------------------
June 1, 1999 to February 29, 2000 6.150:1.0
------------------------------------------------------------------
March 1, 2000 to May 31, 2000 5.700:1.0
------------------------------------------------------------------
</TABLE>
-24-
<PAGE>
<TABLE>
<CAPTION>
==================================================================
Period Leverage Ratio
==================================================================
<S> <C>
June 1, 2000 to February 28, 2001 5.250:1.0
------------------------------------------------------------------
March 1, 2001 to May 31, 2001 4.950:1.0
------------------------------------------------------------------
June, 2001 to February 28, 2002 4.200:1.0
------------------------------------------------------------------
March 1, 2002 to May 31, 2002 3.900:1.0
------------------------------------------------------------------
June 1, 2002 and thereafter 3.600:1.0
==================================================================
</TABLE>
(k) Minimum Interest Coverage Ratio. Subject to Section 7.02(c), not
-------------------------------
permit the Interest Coverage Ratio for any Measurement Period ending during any
period set forth below to be less than the ratio set forth opposite such date
below:
<TABLE>
<CAPTION>
==================================================================
Period Interest Coverage Ratio
==================================================================
<S> <C>
Closing Date to February 28, 1999 1.520:1.0
------------------------------------------------------------------
March 1, 1999 to February 29, 2000 1.600:1.0
------------------------------------------------------------------
March 1, 2000 to February 28, 2001 1.800:1.0
------------------------------------------------------------------
March 1, 2001 to August 31, 2001 2.000:1.0
------------------------------------------------------------------
September 1, 2001 to February 28, 2002 2.200:1.0
------------------------------------------------------------------
March 1, 2002 to August 31, 2002 2.400:1.0
------------------------------------------------------------------
September 1, 2002 and thereafter 2.400:1.0
==================================================================
</TABLE>
(l) Minimum Fixed Charge Coverage Ratio. Subject to Section 7.02(c),
-----------------------------------
not permit the ratio of (x) Consolidated EBITDA for any Measurement Period
ending on or after the date hereof to (y) Consolidated Fixed Charges for such
--
Measurement Period, to be less than 0.88:1.0.
(m) Related Documents. Keep, observe and comply with all of its
-----------------
covenants and obligations which are set forth in the Merger Agreement, the Stock
and Warrant Purchase Agreement, or any other agreement or instrument delivered
in connection therewith (other than the Senior Loan Documents), and cause each
of its Subsidiaries to keep, observe and comply with all of its covenants and
obligations under the Subordinated Guaranty and related documents, in each case
so long as such covenants and obligations are in force and effect.
(n) Payments. Pay when due all amounts owed by Borrower to Lender,
--------
whether or not pursuant to obligations created hereunder.
(o) Use of Proceeds. Use the proceeds of the Loan incurred hereunder
---------------
only to pay the Merger consideration and related fees and expenses as
contemplated by the Merger Agreement and for working capital and budgeted
general corporate purposes.
-25-
<PAGE>
5.02 Negative Covenants. Borrower covenants that, until the payment
------------------
in full of the Loan and all accrued interest thereon (including all interest
accruing after the commencement of any bankruptcy or reorganization proceeding
at the rate or rates provided herein) and all other fees, amounts and
obligations outstanding or payable to Lender (or reasonably expected by Lender
to become payable) hereunder and under the Subordinated Note, it shall not
without the prior written consent of Lender:
(a) Indebtedness. Create, incur, assume, guarantee or be or remain
------------
liable for, contingently or otherwise, or suffer to exist, or permit any of its
Subsidiaries to create, incur, assume, guarantee or be or remain liable for,
contingently or otherwise, or suffer to exist, any Indebtedness, except for the
following:
(i) Indebtedness under this Agreement and the Subordinated
Note and additional Indebtedness of Borrower to Lender which is incurred as
otherwise agreed by Borrower and Lender;
(ii) Indebtedness constituting Senior Debt;
(iii) Indebtedness in existence on the date hereof and set
forth on the Disclosure Schedule (other than Indebtedness that is to be
-------------------
repaid in connection with the Closing);
(iv) Indebtedness representing intercompany loans and advances
(x) to Borrower from its Subsidiaries and (y) from Borrower to its Wholly
Owned Subsidiaries; provided that such Indebtedness shall not be held by
--------
any Person other than Borrower or a Wholly Owned Subsidiary, and such
Indebtedness shall not be subordinate to any other Indebtedness or other
obligation of the obligor other than the Senior Debt or the Loan;
(v) Indebtedness secured by Liens permitted under Section
5.02(b)(8), (9), (10), and (13) not exceeding in the aggregate $2.0 million
at any one time, and any renewals, extensions, modifications and
replacements thereof that do not increase the amount thereof or provide for
terms materially less favorable to Borrower or any of its Subsidiaries;
(vi) Indebtedness arising from honoring a check, draft or
similar instrument against insufficient funds; provided that such
--------
Indebtedness is extinguished within two Business Days of its incurrence;
(vii) obligations under Operating Leases permitted by the
Senior Loan Agreement and Guaranties to the extent permitted under Section
5.02(c);
(viii) unsecured Indebtedness of Borrower or any of its
Subsidiaries in an aggregate principal amount not to exceed, together with
Guaranties (without duplication) permitted under Section 5.02(c), $2.0
million at any time outstanding, and any renewals, extensions,
modifications and replacements thereof that do not increase the amount
thereof or provide for terms materially less favorable to Borrower or any
of its Subsidiaries;
-26-
<PAGE>
(ix) Indebtedness with respect to Capitalized Leases not
exceeding in the aggregate $2.0 million at any one time outstanding, and
any renewals, extensions, modifications and replacements thereof that do
not increase the amount thereof or provide for terms materially less
favorable to Borrower or any of its Subsidiaries;
(x) Indebtedness under the Subordinated Guaranty; and
(xi) any additional Indebtedness permitted under the provisions
of the Senior Loan Agreement as in effect on the date hereof (without
duplication of that permitted under this Section 5.02(a)).
(b) Negative Pledge; Liens. Create, assume, incur or suffer to be
----------------------
created, assumed, incurred or to exist, or permit any Subsidiary to create,
incur, assume or suffer to exist, any Lien upon or with respect to any of its
respective properties or assets of any character, whether now owned or hereafter
acquired, or sell any such property or assets subject to an understanding or
agreement, contingent or otherwise, to repurchase such property or assets, or
assign any right to receive income, or file or permit the filing of any
financing statement under the UCC or any other similar notice of Lien under any
similar recording or notice statute, except the following:
(1) Liens as in effect from time to time securing Senior Debt;
(2) Liens in existence on the date hereof and set forth on the
Disclosure Schedule (other than Liens securing Indebtedness that is to be
-------------------
repaid in connection with the Closing);
(3) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due and payable or which are being contested
in good faith by appropriate proceedings and for which appropriate reserves
have been established in accordance with GAAP consistently applied on
Borrower's financial records;
(4) Mechanics', materialmen's or contractors' liens or
encumbrances or any similar statutory lien or restriction, securing
payments and obligations incurred in the ordinary course of business, in
each case for sums which are not past due, which are past due but the
nonpayment of which would not (either individually or in the aggregate)
have a Material Adverse Effect, or which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP, consistently applied, on Borrower's
financial records;
(5) Deposits or pledges made in the ordinary course of
business in connection with, or to secure payment of, utilities or similar
services, workers' compensation, unemployment insurance, old age pensions
or other insurance or social security obligations;
(6) Deposits or pledges to secure the performance of bids,
trade contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds, and other
obligations of like nature incurred in the ordinary course of business;
-27-
<PAGE>
(7) Easements, rights-of-way, encumbrances, zoning
regulations, restrictions and other similar charges and encumbrances not
interfering with the ordinary conduct of the business of Borrower and its
Subsidiaries or materially detracting from the value of the real property
subject thereto;
(8) Liens upon tangible personal property acquired after the
date hereof by Borrower or any of its Subsidiaries, each of which Liens
either (A) existed on such property before the time of its acquisition and
was not created in anticipation thereof, or (B) was created solely for the
purpose of securing Indebtedness representing, or incurred to finance,
refinance or refund, the cost of such property or improvements thereon;
provided that the principal amount of any such Indebtedness secured by any
--------
such Lien shall at no time exceed 100% of the fair market value of such
property at the time it was acquired;
(9) Liens existing on any property of any Person at the time
such Person becomes a Subsidiary or is merged or consolidated with or into
a Subsidiary and, in each case, not created in contemplation of or in
connection with such event; provided, however, that such Liens do not
-------- -------
extend to any other property of Borrower or any of its Subsidiaries;
(10) Liens not otherwise permitted hereunder securing
obligations not at any time exceeding in the aggregate $1.0 million;
(11) Liens securing Indebtedness with respect to forward
contracts, interest rate cap, collar and swap contracts, foreign currency
exchange contracts, hedging contracts and other similar contracts required
or permitted under the Senior Loan Agreement;
(12) Attachment or judgment Liens (including prejudgment
attachment) the enforcement of which is effectively stayed or payment of
which is covered in full (subject to a customary deductible) by insurance
or which do not otherwise result in an Event of Default under Section
6.01(h);
(13) Liens securing obligations in respect of Capitalized
Leases permitted hereunder solely on property subject to such Capitalized
Leases;
(14) obligations or duties affecting any property of Borrower
or any of its Subsidiaries to any municipality or public authority with
respect to any franchise, grant, license or permit which do not materially
impair the use of such property for the purposes for which it is held;
(15) leases or subleases granted to third Persons not
interfering in any material respect with the business of Borrower or any of
its Subsidiaries;
(16) Liens arising from UCC financing statements regarding
Operating Leases permitted by the Senior Loan Agreement or Capitalized
Leases permitted hereunder;
(17) any interest or title of a lessor or sublessor under any
Operating Leases permitted by the Senior Loan Agreement or Capitalized
Leases permitted hereunder;
-28-
<PAGE>
(18) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of custom duties in connection with
the importation of goods so long as such Liens attach only to the imported
goods;
(19) Liens arising out of consignment or similar arrangements
for the sale of goods entered into by Borrower or any of its Subsidiaries
in the ordinary course of business;
(20) any extension, renewal or replacement of the foregoing;
provided, however, that the Liens permitted under this clause (20) shall
-------- -------
not cover any additional Indebtedness or property (other than like property
substituted for the property covered by such Lien); and
(21) any additional Liens permitted under the provisions of the
Senior Loan Agreement as in effect on the date hereof (without duplication
of that permitted under this Section 5.02(b)).
(c) Contingent Liabilities. Enter into or otherwise become liable
----------------------
for, or permit any Subsidiary to enter into or otherwise become liable for, any
Guaranties, except for: (i) Guaranties of Senior Debt, (ii) the Subordinated
Guaranty, (iii) Guaranties in respect of Operating Leases to the extent
permitted under the Senior Loan Agreement, (iv) Guaranties by Borrower or any
Subsidiary in respect of Indebtedness or other liabilities of Borrower or any
Wholly Owned Subsidiary to the extent the existence of such Indebtedness or
other liabilities is not prohibited under this Agreement, (v) other Guaranties
which, together with the amount of Indebtedness incurred under Section
5.02(a)(viii) (without duplication), does not exceed $2.0 million in the
aggregate at any time outstanding, (vi) endorsements for collection or deposit
in the ordinary course of business, (vii) the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business, (viii) Guaranties existing as of the date hereof and set
forth on the Disclosure Schedule, and any renewals, extensions, modifications
-------------------
and replacements thereof that do not increase the amount thereof or provide for
terms materially less favorable to Borrower or any of its Subsidiaries, (ix)
forward contracts, interest rate cap, collar and swap contracts, foreign
currency exchange contracts, hedging contracts and other similar contracts that
are permitted by the Senior Loan Agreement, (x) Guaranties in connection with
any sale or disposition of assets of the Borrower or any of its Subsidiaries (to
the extent such sale or disposition is not prohibited under this Agreement or
the Senior Loan Agreement), arising in connection with indemnification and other
agreements in respect of any contract relating to such sale or disposition, not
to exceed the consideration received by Borrower and its Subsidiaries in
connection with such sale or disposition and excluding in all cases any Guaranty
with respect to any obligation of any third party incurred in connection with
the acquisition of the assets which are the subject of such sale or disposition,
and (xi) any additional Guaranties permitted under the provisions of the Senior
Loan Agreement as in effect on the date hereof (without duplication of that
permitted under this Section 5.02(c)).
(d) Disposition of Capital Assets. Sell, assign, lease, transfer or
-----------------------------
otherwise dispose of, or permit any Subsidiary to sell, assign, lease, transfer
or otherwise dispose of, any of its capital assets consisting of property, plant
or equipment, except that, subject to the provisions of Section 2.04(c)(i),
Borrower and its Subsidiaries may sell or otherwise transfer or dispose of such
-29-
<PAGE>
capital assets (i) in the case of Subsidiaries, to Borrower or to any Wholly
Owned Subsidiary, (ii) if the net proceeds of such sale, transfer or other
disposition are applied, within 180 days after such sale, transfer or other
disposition, to acquire capital assets of at least equivalent value, (iii) if
the net proceeds of such sale, transfer or other disposition are applied to
prepay or repay the Senior Debt pursuant to the terms of the Senior Loan
Agreement, (iv) in the case of motor vehicles, in the ordinary course of
business, (v) any other capital assets sold for fair market value not exceeding
$250,000 in the aggregate during any fiscal year for all such sales by all of
Borrower and its Subsidiaries and (vi) as otherwise permitted under the
provisions of the Senior Loan Agreement as in effect on the date hereof (without
duplication of that permitted under this Section 5.02(d)).
(e) Mergers, etc. Merge or consolidate with, or sell, assign, lease,
-------------
transfer or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to, any Person or Persons, or permit any Subsidiary to do
so, other than (i) a sale or other disposition of assets by any Subsidiary to
Borrower or to any Wholly Owned Subsidiary, (ii) a merger or consolidation of a
Subsidiary with or into Borrower, in which Borrower is the surviving
corporation, (iii) a merger or consolidation of a Subsidiary with or into a
Wholly Owned Subsidiary, in which a Wholly Owned Subsidiary is the surviving
corporation, (iv) acquisitions permitted under Section 5.02(i)(xiii), or (v) as
otherwise permitted under the provisions of the Senior Loan Agreement as in
effect on the date hereof (without duplication of that permitted under this
Section 5.02(e)).
(f) Dividends and Stock Purchases. Directly or indirectly declare or
-----------------------------
pay, or permit any Subsidiary to declare or pay, any Dividends on Borrower's or
any of its Subsidiaries' capital stock or other equity securities or make or
incur, or permit any Subsidiary to make or incur, any liability to make any
Stock Purchase (or directly or indirectly redeem, purchase or make any payments
with respect to any stock appreciation rights, phantom stock plans or similar
rights or plans) other than (i) payment of the merger consideration as
contemplated by the Merger Agreement in an amount not to exceed $91.0 million in
connection with the Merger, (ii) so long as no Event of Default or Potential
Event of Default then exists or would be caused thereby, Dividends on the
Preferred Stock pursuant to Borrower's Articles of Incorporation (and the
Certificate of Designation filed thereunder with respect to the Preferred Stock)
as in effect on the date hereof, (iii) Dividends paid by any Subsidiary (A) to
Borrower or to a Wholly Owned Subsidiary or (B) if such Dividends are made on a
pro rata basis with respect to all of such Subsidiary's capital stock or other
equity interests, (iv) dividends payable in shares of Common Stock issued upon
the outstanding shares of Common Stock, (v) Stock Purchases of the capital stock
or other equity interests of a Subsidiary (A) that are held by Borrower or a
Wholly Owned Subsidiary or (B) by such Subsidiary if such Stock Purchases are
made on a pro rata basis with respect to all of such Subsidiary's capital stock
or other equity interests, (vi) so long as no Event of Default or Potential
Event of Default then exists or would be caused thereby, Stock Purchases of
Common Stock from any current holder of Common Stock (who is a current employee
of Borrower or its Subsidiaries) or spouses or other heirs of such employee in
the event of death, disability or a Hardship with respect to such employee
(provided that the aggregate amount of all such Stock Purchases from all such
--------
employees under this clause (vi) shall not exceed $500,000 in any fiscal year
and shall not exceed $2.0 million in the aggregate) or (vii) so long as no Event
of Default or Potential Event of Default then exists or would be caused thereby,
any additional Dividends or Stock Purchases permitted under the provisions of
the Senior
-30-
<PAGE>
Loan Agreement as in effect on the date hereof (without duplication of that
permitted under this Section 5.02(f)).
(g) Issuance of Certain Capital Stock; Issuance and Disposition of
--------------------------------------------------------------
Capital Stock of Subsidiaries. After the date hereof, (i) make any issuance or
- -----------------------------
series of issuances of capital stock that would result directly or indirectly in
a Change of Ownership, (ii) make any issuance of Disqualified Capital Stock
(other than issuances of Preferred Stock as payment-in-kind Dividends with
respect to outstanding Preferred Stock), or (iii) sell or otherwise dispose of,
or permit any Subsidiary to issue, sell, or otherwise dispose of, any shares of
capital stock or other equity securities or interests (including options,
warrants or other rights to acquire any such capital stock or other equity
interests, any securities convertible into or exchangeable for any such capital
stock or other equity interests, or any stock appreciation rights, phantom stock
rights or other rights) of any Subsidiary, except in the case of clause (iii)
for issuances, sales or other dispositions (A) to Borrower or to a Wholly Owned
Subsidiary, (B) of directors' qualifying shares as required by applicable law,
(C) of all of the capital stock of a Subsidiary if such disposition would be
permitted as a sale of assets under Section 5.02(d) and if the proceeds of such
disposition are treated as such a sale of assets for all purposes under this
Agreement, or (D) as otherwise permitted under the provisions of the Senior Loan
Agreement as in effect on the date hereof (without duplication of that permitted
under this Section 5.02(g)).
(h) Amendments of Other Agreements.
------------------------------
(i) Amend, supplement, modify, terminate, waive or permit to be
amended, supplemented, modified, terminated or waived, in any manner which
could reasonably be expected to be materially adverse to the Lender, any of
the provisions of the articles or certificate of incorporation or bylaws of
Borrower or any of its Subsidiaries (including any certificate of
designation setting forth the terms of any class or series of preferred
stock), the Merger Agreement, the Stock and Warrant Purchase Agreement, the
Subordination Agreements, or any other agreement entered into with respect
to the capital stock or other equity securities or interests of Borrower or
any of its Subsidiaries.
(ii) Amend, supplement, modify, terminate, waive, or permit to be
amended, supplemented, modified, terminated or waived, any of the
provisions of the Senior Loan Agreement, the Senior Notes or the other
Senior Loan Documents, if the effect of such action would be to authorize,
approve or create any Indebtedness thereunder, or any commitment to extend
any Indebtedness thereunder, in each case that would not constitute Senior
Debt (except to the extent such Indebtedness that is not Senior Debt is
otherwise permitted under Section 5.02(a)), or to cause any Indebtedness
existing or committed to be extended thereunder not to be Senior Debt
(except to the extent such Indebtedness that is not Senior Debt is
otherwise permitted under Section 5.02(a)).
(i) Investments. Make, or permit any Subsidiary to make, any
-----------
Investments, except for: (i) direct obligations of the United States of America
or of any state thereof; (ii) prime commercial paper; (iii) certificates of
deposit issued by any commercial bank having capital and surplus in excess of
$100,000,000; (iv) money market funds of nationally recognized institutions
investing solely in obligations described in clauses (i), (ii) and (iii) above;
(v) advances, loans or
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<PAGE>
extensions of credit to employees of Borrower and its Subsidiaries in the
ordinary course of business; (vi) Investments in Wholly Owned Subsidiaries,
(vii) the establishment of Subsidiaries by Borrower to the extent permitted by
Section 5.02(n); (viii) Investments in existence on the date hereof and set
forth on the Disclosure Schedule; (ix) Investments constituting Indebtedness
-------------------
permitted under Section 5.02(a) or Guaranties permitted under Section 5.02(c);
(x) Investments by Borrower in forward contracts, interest rate cap, collar and
swap contracts, foreign currency exchange contracts, hedging contracts and other
similar contracts required or permitted under the Senior Loan Agreement, that
are entered into as bona fide hedges and not for speculative purposes; (xi)
extensions of credit in the nature of accounts receivable or notes receivable
arising from the sale or lease of goods or services in the ordinary course of
business; (xii) pledges or deposits in connection with (A) the non-delinquent
performance of bids, trade contracts (other than for borrowed money), leases or
statutory obligations, (B) contingent obligations on surety or appeal bonds, and
(C) other non-delinquent obligations of a like nature, in each case incurred in
the ordinary course of business; (xiii) Investments to acquire an interest in a
company or business (whether by purchase of assets, purchase of stock, merger or
otherwise), so long as (1) no Event of Default or Potential Event of Default
exists or would be caused thereby, (2) the aggregate amount of all such
acquisitions after the date of the Closing shall not exceed $10.0 million and
not more than $5.0 million in any fiscal year, and (3) if such acquisition
results in the creation or acquisition of a Subsidiary, such Subsidiary shall
comply with the provisions of Section 5.02(n); (xiv) Investments (including debt
obligations) received in connection with the bankruptcy or reorganization of
suppliers and customers and in settlement of delinquent obligations of, and
other disputes with, customers and suppliers arising in the ordinary course of
business; (xv) Investments in Subsidiaries to the extent of the securities of
such Subsidiaries held on the date of the Closing (and any securities issued in
exchange therefor or as a dividend thereon); (xvi) Investments consisting of
non-cash consideration received in the form of securities, notes or similar
obligations in connection with any sale of assets or capital stock of a
Subsidiary permitted hereunder (provided that such non-cash consideration
--------
received in connection with any such sale or disposition shall not exceed 10% of
the total consideration received in connection with such sale or disposition);
(xvii) additional Investments not exceeding $2.5 million in the aggregate
outstanding at any time (without giving effect to any write-downs or write-offs
thereof), net of any returns of capital, cash dividends and distributions
received in respect thereof and net cash proceeds of any sales thereof; and
(xviii) any additional Investments permitted under the provisions of the Senior
Loan Agreement as in effect on the date hereof (without duplication of that
permitted under this Section 5.02(i)).
(j) Restrictions on Subsidiary Distributions. Create, or permit any
----------------------------------------
of its Subsidiaries directly or indirectly to create or otherwise cause or
suffer to exist or become effective, any encumbrance or restriction of any kind
on the ability of any such Subsidiary to (i) pay dividends or make any other
distribution on any of such Subsidiary's capital stock or other equity security
owned by Borrower or any other Subsidiary of Borrower, (ii) subject to
subordination provisions, pay any Indebtedness owed to Borrower or any other
Subsidiary, (iii) make loans or advances to Borrower or any other Subsidiary or
(iv) transfer any of its property or assets to Borrower or any other Subsidiary,
except for (1) such encumbrances or restrictions existing under or by reason of
(A) applicable law, (B) restrictions under the Senior Loan Agreement or the
other Senior Loan Documents, (C) such restrictions with respect to the transfer
of those assets subject to a Lien permitted under Section 5.02(b), (D) customary
provisions restricting subletting or assignment of any lease governing a
leaseholder interest of Borrower or any of its Subsidiaries, and (E) with
respect
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<PAGE>
to restrictions described in clause (iv) only, restrictions in any agreement
relating to any sale or other disposition of assets of Borrower or any of its
Subsidiaries that is permitted hereunder, and except for (2) any additional
encumbrances or restrictions permitted under the provisions of the Senior Loan
Agreement as in effect on the date hereof (without duplication of that permitted
under this Section 5.02(j)).
(k) Transactions with Affiliates. Enter into, amend, supplement,
----------------------------
modify, terminate or waive, or permit any Subsidiary to enter into, amend,
supplement, modify, terminate or waive, any agreement, contract, commitment,
transaction or arrangement with (i) any of its or any of its Subsidiaries'
officers, directors, principal stockholders (other than Borrower or another
Subsidiary), senior executives, or Affiliates, (ii) any such Person's spouse,
sibling, lineal ancestor or descendant, or spouse's sibling or lineal ancestor
or descendant, or (iii) any entity in which any Person described in (i) or (ii)
above directly or indirectly owns a beneficial interest, unless such transaction
is otherwise not prohibited under this Agreement, is in the ordinary course of
Borrower's or such Subsidiary's business and is on fair and reasonable terms
that are not less favorable to Borrower or such Subsidiary than those that would
be obtainable at the time in an arm's length transaction with a Person not
described in (i), (ii) or (iii) above; provided that the following shall in any
--------
event be permitted: (1) Dividends and Stock Purchases otherwise permitted under
this Agreement, (2) the payment of reasonable fees to directors of Borrower or
any Subsidiary who are not employees of Borrower or any of its Subsidiaries, (3)
so long as no Event of Default or Potential Event of Default would arise
therefrom, any transaction with an officer or member of the board of directors
of Borrower or any of its Subsidiaries in the ordinary course of business
involving compensation, indemnity, employee benefit arrangements or expense
reimbursement, (4) loans or advances to employees otherwise permitted under this
Agreement, (5) transactions and agreements in existence on the date hereof and
described with particularity in the relevant schedule to the Stock and Warrant
Purchase Agreement, (6) customary employment arrangements and benefit programs
on reasonable terms as approved by the board of directors of Borrower or a
committee thereof, (7) so long as no Event of Default or Potential Event of
Default exists or would be caused thereby, repurchases of capital stock as
provided by the Shareholders' Agreement as in effect on the date hereof; and (8)
so long as no Event of Default or Potential Event of Default would be caused
thereby, any additional such transaction permitted under the provisions of the
Senior Loan Agreement as in effect on the date hereof (without duplication of
that permitted under this Section 5.02(k)).
(l) Change of Business. Engage, or permit any Subsidiary to engage,
------------------
directly or indirectly, to any substantial extent in any line or lines of
business activities other than the business of the type conducted by the
Borrower and its Subsidiaries as of the date of the Closing.
(m) Fiscal Year. Make or permit, or permit any Subsidiary to make or
-----------
permit, any change in its respective fiscal year end (the Saturday closest to
August 31 of each year).
(n) Limitation on Creation of Subsidiaries. Establish, create or
--------------------------------------
acquire, or permit any Subsidiary to establish, create or acquire, any
Subsidiary; provided that Borrower or any Wholly Owned Subsidiary shall be
--------
permitted to establish or create (A) any Wholly Owned Subsidiary organized
within the United States and its territorial possessions or (B) any other
Subsidiary the establishment or creation of which is permitted under the
provisions of the Senior Loan Agreement as in effect on the date hereof, in each
case so long as (i) such new Subsidiary executes a counterpart
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to the Subordinated Guaranty and any related certificates or documents necessary
to become a party thereof and bound thereby, in each case in form and substance
satisfactory to Lender and the Senior Lenders, and (ii) such new Subsidiary
shall take all other actions and execute and deliver such other documents as
requested by Lender in connection with the foregoing and not inconsistent with
the terms of the Senior Loan Agreement or any other Senior Loan Documents; and
---
provided further that Borrower or any Wholly Owned Subsidiary shall be permitted
- ----------------
to establish or create any joint venture so long as the aggregate amount
contributed by Borrower and its Subsidiaries with respect to all such joint
ventures does not exceed $5.0 million in the aggregate.
(o) Year 2000 Compliance. Each Company will, on or prior to September
--------------------
30, 1999, eliminate any significant risks that computer hardware, software or
any equipment containing embedded microchips used in their business or
operations will not in the case of dates or time periods occurring after
December 31, 1999, function, in the receipt, transmission, processing,
manipulation, storage, retrieval, retransmission or other utilization of data,
at least as effectively as in the case of dates or time periods occurring prior
to January 1, 2000, in any respect that would cause a Material Adverse Effect.
5.03 Reporting Requirements. Borrower covenants that, until the
----------------------
payment in full of the Loan and all accrued interest thereon (including all
interest accruing after the commencement of any bankruptcy or reorganization
proceeding at the rate or rates provided herein) and all other amounts, fees and
obligations outstanding or payable to Lender (or reasonably expected by Lender
to become payable) hereunder and under the Subordinated Note, it shall furnish
to Lender:
(a) Monthly Financial Statements. As soon as practicable but in any
----------------------------
event within 30 days after the end of each monthly accounting period in each
fiscal year, unaudited consolidated statements of income and cash flows of
Borrower and its Subsidiaries for such monthly period and for the period from
the beginning of the fiscal year to the end of such month, and an unaudited
consolidated balance sheet of Borrower and its Subsidiaries as of the end of
such monthly period, setting forth in each case comparisons to the Company's
annual budget and to the corresponding period in the preceding fiscal year, all
in reasonable detail, and all such statements shall be prepared in accordance
with GAAP consistently applied (subject to the absence of footnote disclosures
and to normal year-end adjustments for recurring accruals) and shall be
certified by Borrower's chief financial officer; in addition, Borrower shall
provide consolidating financial statements for any Subsidiary organized outside
of the United States (as defined in Section 7701(a)(9) of the Internal Revenue
Code) for the same periods substantially consistent with the foregoing.
(b) Annual Financial Statements. As soon as practicable but in any
---------------------------
event within 90 days after the end of each fiscal year, consolidated statements
of income, cash flows and stockholders' equity of Borrower and its Subsidiaries
for such fiscal year and a consolidated balance sheet of Borrower and its
Subsidiaries as of the end of such fiscal year, setting forth in each case
comparisons to the Company's annual budget and to the preceding fiscal year, all
in reasonable detail, and all such statements shall be prepared in accordance
with GAAP consistently applied and shall be accompanied by (1) an opinion from
an independent public accounting firm of recognized national standing selected
by Borrower and approved by Lender, which opinion shall contain no material
exceptions, qualifications or limitations not reasonably satisfactory to Lender,
(2) a certificate from such accounting firm, addressed to Borrower's Board of
Directors, stating that it has
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<PAGE>
caused the provisions of this Agreement to be reviewed and that in the course of
its examination nothing has come to its attention to lead it to believe that an
Event of Default or Potential Event of Default has occurred or exists hereunder
or, if such is not the case, specifying in reasonable detail the nature and
period of existence thereof, and (3) a copy of such firm's annual management
letter to Borrower's Board of Directors; in addition, Borrower shall provide
consolidating financial statements for any Subsidiary organized outside of the
United States (as defined in Section 7701(a)(9) of the Internal Revenue Code)
for the same periods substantially consistent with the foregoing. Each of the
financial statements referred to in paragraphs (a) and (b) shall be true and
correct in all material respects as of the dates and for the periods stated
therein, subject in the case of unaudited financial statements to changes
resulting from normal year-end adjustments for recurring accruals (none of which
would, alone or in the aggregate, have a Material Adverse Effect).
(c) Certificate of Compliance. Together with (i) the financial
-------------------------
statements furnished pursuant to Section 5.03(a) hereof for the third monthly
accounting period in each fiscal quarter and (ii) the annual financial
statements furnished pursuant to Section 5.03(b), there shall be delivered to
Lender a certificate signed by Borrower's chief financial officer stating that
he has caused the provisions of this Agreement to be reviewed and that nothing
has come to his attention to lead him to believe that any Event of Default or
Potential Event of Default has occurred or exists hereunder or, if such is not
the case, specifying in reasonable detail the nature and period of existence
thereof and what actions Borrower and its Subsidiaries have taken, are taking
and propose to take with respect thereto. Each such quarterly and annual
certificate shall also contain, for each period then ended, calculations in
reasonable detail evidencing Borrower's compliance, as of the close of such
quarterly or annual period, with the covenants contained in Sections 5.01(j),
5.01(k), and 5.01(l) hereof.
(d) Other Independent Accountant Materials. Promptly upon receipt
--------------------------------------
thereof, any additional reports, management letters or other detailed
information concerning significant aspects of the operations or financial
affairs of Borrower or any of its Subsidiaries given to Borrower by its
independent accountants (and not otherwise contained in other materials provided
hereunder).
(e) Annual Budgets; Notification of Deviations. Within 60 days after
------------------------------------------
the end of each fiscal year, an annual operating budget prepared on a monthly
basis for Borrower and its Subsidiaries for the succeeding fiscal year
(displaying anticipated statements of income and cash flows and balance sheets)
and an annual capital budget for Borrower and its Subsidiaries for the
succeeding fiscal year (displaying anticipated expenditures for capital assets),
and promptly upon preparation thereof any other significant budgets prepared by
Borrower and any revisions of such annual or other budgets; and within 30 days
after any monthly period in which there is a material adverse deviation from the
annual budgets, a certificate from Borrower's chief financial officer or
president explaining in reasonable detail the deviation and what actions
Borrower and its Subsidiaries have taken, are taking and propose to take with
respect thereto.
(f) ERISA Notifications.
-------------------
(i) Promptly after receipt thereof by the plan administrator, any
notice from the Internal Revenue Service or the PBGC relating to
disqualification, termination or the intent to terminate any Plan;
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<PAGE>
(ii) promptly after receipt thereof by the plan administrator,
any notice from the Internal Revenue Service relating to the
disqualification of any Plan that is qualified under Section 401 of the
Internal Revenue Code;
(iii) as soon as possible (in any event, within 30 days) after
either Borrower or the plan administrator of any Plan knows or has reason
to know that any Reportable Event has occurred which would reasonably be
expected to have a Material Adverse Effect, a written notice that such
Reportable Event has occurred; and
(iv) together with each notice or copy of a notice or filing
specified in the immediately preceding clauses (i), (ii) and (iii), a
statement of Borrower's chief financial officer setting forth details as to
all events referred to therein and the action with respect thereto taken,
being taken or proposed to be taken by Borrower.
(g) Notices of Default. As soon as possible (but in any event within
------------------
five Business Days) after the discovery or receipt of notice of any Event of
Default or Potential Event of Default, a certificate of Borrower's chief
financial officer or president specifying in reasonable detail the nature and
period of existence thereof and what actions Borrower and its Subsidiaries have
taken, are taking and propose to take with respect thereto.
(h) Notices of Litigation. Promptly after the commencement thereof,
---------------------
written notice of all actions, suits and proceedings before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which involve any substantial risk of any Material Adverse
Effect.
(i) Copies of Reports, Filings, etc. Promptly after the sending or
-------------------------------
filing thereof, copies of all proxy statements, financial statements, reports
and any other general written communications which Borrower sends to its
stockholders and copies of all regular, special or periodic reports and all
registration statements which Borrower files, or (to Borrower's knowledge) any
of its officers or directors file with respect to Borrower, with the Securities
and Exchange Commission or any governmental authority which may be the successor
therefor, or with any national securities exchange.
(j) Notices of Adverse Judgments. Promptly after the entering
----------------------------
thereof, written notice of all adverse judgments in excess of $1.0 million or
which involve any substantial risk of any Material Adverse Effect entered by any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, against Borrower or any Subsidiary, which
notice shall include the exact dollar amount of any such adverse judgment as
well as any other expected adverse impact on Borrower and its Subsidiaries.
(k) Environmental Notices. Promptly (but in any event within 15 days)
---------------------
after receipt or discovery of any of the following, written notice thereof if
such occurrence, event or condition has had or would reasonably be expected to
have (either individually or in the aggregate) a Material Adverse Effect:
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<PAGE>
(i) written notice or claim to the effect that Borrower or any
of its Subsidiaries is or may be liable to any Person as a result of the
release or threatened release of any toxic, chemical or hazardous
substance, material or waste;
(ii) written notice that any real or personal property of
Borrower or any of its Subsidiaries is subject to any environmental lien;
(iii) written notice of violation of, or discovery of a
condition which has resulted or would reasonably be expected to result in a
violation of, any requirement of law involving environmental, health or
safety matters; or
(iv) written notice of the commencement of any judicial or
administrative proceeding or investigation alleging a violation of any
requirement of law involving environmental, health or safety matters or
subjecting Borrower or any of its Subsidiaries to environmental liabilities
or costs.
Upon written request by Lender, Borrower shall submit to Lender a report
providing an update of the status of any environmental, health or safety
compliance, hazard or liability issues identified in any notice or report
required pursuant to this Section 5.03(k) and any other environmental, health or
safety compliance obligation, remedial obligation or liability.
(l) Material Adverse Changes. Promptly after the occurrence thereof,
------------------------
written notice of all events, conditions, acts, facts and omissions (except
general economic conditions which are a matter of public knowledge) which have
had, or involve any substantial risk of, (either individually or in the
aggregate) any Material Adverse Effect.
(m) Accountant's Letter. Promptly after the Closing, and promptly
-------------------
after any changing of independent accountants, a letter addressed to Borrower
from the independent accountants referred to in Section 5.03(b) and (d) above
authorizing such accountants to communicate with Lender regarding Borrower and
its Subsidiaries and informing such accountants of Lender's reliance on
Borrower's financial statements.
(n) Other Information. With reasonable promptness, such other
-----------------
information and financial data concerning Borrower and its Subsidiaries as
Lender may from time to time reasonably request.
ARTICLE VI
DEFAULT
-------
6.01 Events of Default. An Event of Default shall mean the occurrence
-----------------
of one or more of the following events:
(a) Borrower shall default in the payment of (i) any principal or
premium with respect to the Loan when due, whether at maturity, upon any
required prepayment, by acceleration or otherwise, (ii) any interest with
respect to the Loan when due or (iii) any other amount required
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<PAGE>
to be paid to Lender under this Agreement or the Subordinated Note when due, and
in the case of clauses (ii) and (iii), the default in payment shall have
continued uncured for a period of five or more Business Days;
(b) Borrower or any Material Subsidiary of Borrower shall default in
(i) the payment at final maturity of any principal of any Indebtedness (other
than the Loan) with an aggregate principal amount in excess of $5.0 million,
beyond any period of grace provided with respect thereto, after giving effect to
any consents or waivers relating thereto obtained before the expiration of any
such period of grace, and (except in the case of a default under the Senior Loan
Agreement or other Senior Loan Documents) such Indebtedness shall not have been
paid or defeased in full or such default shall have continued uncured for a
period of 60 or more calendar days, or (ii) the performance or observance of any
other covenant, agreement, term or condition contained in any agreement or
instrument with respect to any Indebtedness (other than the Loan (except as
described in Section 7.02(c)(ii)(D)) with an aggregate principal amount in
excess of $5.0 million, if as a result of such default (after giving effect to
any consents or waivers relating thereto obtained before the expiration of any
such period of grace), such obligation shall be accelerated, become due in full,
or be required to be prepaid in full (whether by redemption, purchase, offer to
purchase or otherwise), prior to its stated maturity, and (except in the case of
an acceleration under the Senior Loan Agreement or other Senior Loan Documents
or, as described in Section 7.02(c)(ii)(D), by Lender under this Agreement) such
acceleration shall not have been rescinded, annulled or otherwise cured within
60 calendar days after the date of such acceleration;
(c) Any representation or warranty made by Borrower in this Agreement,
or in any schedule, certificate or financial statement furnished to Lender
pursuant to the provisions hereof or thereof, shall have been false or
misleading in any material respect as of the time made or furnished;
(d) Any of this Agreement, the Subordinated Note or the Subordination
Agreements shall cease to be in full force and effect (other than pursuant to
its terms) or declared to be null and void by a court of competent jurisdiction;
(e) Borrower shall default in the performance of or compliance with
any provision of Sections 5.01(j) through (l), inclusive, or Section 5.02
hereof, and in the case of a default under any provision of Section 5.02 hereof
such default shall have continued uncured for a period of 30 or more calendar
days;
(f) Borrower shall default in the performance of or compliance with
any other covenant, condition or provision of this Agreement, the Subordinated
Note or the Subordination Agreements and such default shall have continued for a
period of 30 calendar days after written notice thereof to Borrower by Lender
specifying such default and demanding the remedy thereof;
(g) Borrower or any of its ERISA Affiliates shall fail to pay when due
an amount or amounts aggregating in excess of $5.0 million which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to terminate a
Material Plan shall be filed under Title IV of ERISA by Borrower or any of its
ERISA Affiliates, any plan administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of ERISA to terminate, to
impose
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<PAGE>
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or to cause a trustee to be appointed to administer any Material Plan; or a
condition shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be terminated; or there shall
occur a complete or partial withdrawal from, or a default, within the meaning of
Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans
which could reasonably be expected to cause one or more of Borrower or any of
its ERISA Affiliates to incur a payment obligation in excess of $5.0 million;
(h) A final judgment, which together with all other undischarged final
judgments against Borrower or any Material Subsidiary exceeds an aggregate of
$5.0 million (exclusive of judgment amounts to the extent covered by insurance),
shall have been entered against Borrower or any Material Subsidiary if, within
60 days after the entry thereof, such judgment shall not have been fully
discharged or execution thereof stayed pending appeal, or if, within 60 days
after the expiration of any such stay, such judgment shall not have been fully
discharged;
(i) Any order, judgment, decree or injunction is entered against
Borrower or any of its Material Subsidiaries requiring the dissolution or split
up of Borrower or any of its Material Subsidiaries, and such order, judgment,
decree or injunction remains undischarged or unstayed for more than 60 days; or
(j) A proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief in respect of
Borrower or any Material Subsidiary in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or for
the appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of Borrower or any Material Subsidiary of
Borrower or for any substantial part of its property, or for the winding-up or
liquidation of its affairs, and such proceeding shall remain undismissed or
unstayed and in effect for a period of 60 consecutive days or such court shall
enter a decree or order granting the relief sought in such proceeding;
(k) Borrower or any Material Subsidiary shall commence a voluntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of Borrower or any Material Subsidiary
or for any substantial part of its property, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action in furtherance of any of the
foregoing; or
(l) The Subordinated Guaranty or any material provision thereof shall
cease to be in full force or effect as to any Material Subsidiary of Borrower,
or any Material Subsidiary of Borrower or any Person acting by or on behalf of
any Material Subsidiary of Borrower shall deny or disaffirm any such Material
Subsidiary's obligations under the Subordinated Guaranty, or any Material
Subsidiary of Borrower shall default in the due performance or observance of any
material term, covenant or agreement on its part to be performed or observed
pursuant to the Subordinated Guaranty.
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<PAGE>
6.02 Consequences of Event of Default.
--------------------------------
(a) Money Defaults. If an Event of Default specified in Section
--------------
6.01(a) shall occur and be continuing, Lender may at its option, upon notice to
Borrower, declare the unpaid principal balance of the Subordinated Note, all
interest accrued thereon (including all interest accruing after the commencement
of any bankruptcy or reorganization proceeding at the rate or rates provided
herein) and all other liabilities and obligations of Borrower hereunder
(including all premiums) and under the Subordinated Note to be forthwith due and
payable, and the same shall thereupon become and be immediately due and payable,
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived by Borrower.
(b) Bankruptcy. If an Event of Default specified in Section 6.01(j)
----------
or Section 6.01(k) shall occur with respect to Borrower, the unpaid principal
balance of the Subordinated Note, all interest accrued thereon (including all
interest accruing after the commencement of any bankruptcy or reorganization
proceeding at the rate or rates provided herein) and all other liabilities and
obligations of Borrower hereunder (including all premiums) and under the
Subordinated Note shall be immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived
by Borrower.
(c) Other Defaults. If any Event of Default other than those
--------------
specified in paragraphs (a) and (b) shall occur and be continuing, Lender may at
its option, upon notice to Borrower, declare the unpaid principal balance of the
Subordinated Note, all interest accrued thereon (including all interest accruing
after the commencement of any bankruptcy or reorganization proceeding at the
rate or rates provided herein) and all other liabilities and obligations of
Borrower hereunder (including all premiums) and under the Subordinated Note
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived by Borrower.
6.03 Rights of Setoff. To the extent permitted by law,
----------------
(a) in case an Event of Default shall occur and be continuing or
shall exist, Lender (and any other holder of the Subordinated Note) shall have
the right, in addition to all other rights and remedies available to it, without
notice to Borrower, to setoff against and to appropriate and apply to the unpaid
balance of the Subordinated Note, all accrued interest thereon and all other
obligations of Borrower hereunder and under the Subordinated Note, any debt
owing to, and any other funds held in any manner for the account of Borrower by
Lender (or such holder), including, without limitation, all funds in all deposit
accounts (general or special) now or hereafter maintained by Borrower for its
own account with Lender (or such holder), and Lender is hereby granted a
security interest in and lien on all such debts (including, without limitation,
all such deposit accounts) for such purpose;
(b) such right shall exist whether or not Lender (or such other
holder of the Subordinated Note) shall have made any demand under this Agreement
or the Subordinated Note and whether or not the Subordinated Note and such other
obligations are matured or unmatured; and
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<PAGE>
(c) Borrower hereby confirms Lender's (and such other holder's) right
of banker's lien and setoff, as further specified in Section 7.03 hereof, and
nothing in this Agreement shall be deemed to be any waiver or prohibition of
Lender's (and such other holder's) right of banker's lien and setoff.
6.04 Other Rights. The rights and remedies of Lender (and any other
------------
holder of the Subordinated Note) upon the occurrence of an Event of Default set
forth in Sections 6.02 and 6.03 are cumulative and in addition to and not in
derogation of any other rights Lender (or such other holder) may have under
applicable law or other agreements.
6.05 Automatic Rescission of Certain Accelerations. If any
---------------------------------------------
acceleration of the Loan under Section 6.02(c) shall have occurred due to an
Event of Default under Section 6.01(b), such acceleration pursuant to Section
6.01(b) shall be automatically annulled and rescinded if, prior to Borrower's
payment of the Loan in full or the entry of a judgment with respect to such
acceleration of the Loan, (A) in the case of an Event of Default under Section
6.01(b)(i), the Indebtedness giving rise to such Event of Default shall have
been paid or satisfied in full, (B) in the case of an Event of Default under
Section 6.01(b)(ii), either (1) the acceleration of Indebtedness giving rise to
such Event of Default shall have been rescinded or annulled or (2) with respect
to an acceleration of Indebtedness other than Indebtedness under the Senior Loan
Documents, the accelerated Indebtedness giving rise to such Event of Default
shall have been paid or satisfied in full solely with the proceeds of additional
Indebtedness then permitted under Section 3.02(a) hereof, which additional
Indebtedness is incurred in connection with the repayment of such accelerated
Indebtedness, (C) no other Event of Default shall have occurred and be
continuing (other than an Event of Default arising by virtue of such
acceleration of the Loan), and (D) all amounts then due and payable to the
---
holders of the Loan (other than any amount due by virtue of such acceleration of
the Loan) shall have been paid in full.
ARTICLE VII
SUCCESSORS AND ASSIGNS; PARTICIPATIONS
--------------------------------------
7.01 Successors and Assigns in General. This Agreement shall be
---------------------------------
binding upon and, subject to Section 7.02 hereof, inure to the benefit of the
parties hereto and their respective successors and assigns, except that Borrower
may not assign or transfer any of its rights hereunder or any interest herein or
delegate its liabilities, obligations or duties hereunder without the prior
written consent of Lender. Lender shall give Borrower prompt written notice of
any assignment of or participation in the Loan hereunder. In connection with
any such transfer of the Loan (or any portion thereof), Borrower shall (i)
legend the instrument evidencing such Loan (or such portion thereof) by stating
on the face of such instrument that it was issued with "original issue discount"
and (ii) comply with such other requirements as may be imposed by Treas. Reg.
'1.1275-3(b)(1) or any successor provision.
7.02 Conditions. Lender or any Assignee may assign all or any portion
----------
of its interest in and rights under this Agreement and the Subordinated Note to
another financial institution or fund (an "Assignee"), or grant a participating
--------
or beneficial interest in this Agreement and the Loans to any other financial
institution or fund (a "Participant"), subject to the following conditions:
-----------
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<PAGE>
(a) Securities Laws. Such assignment or participation shall not
---------------
be made under such circumstances as may constitute a violation of the
Securities Act of 1933, as amended, or regulations thereunder, or any
applicable state securities laws or regulations.
(b) Agent. Lender shall enter into an agency relationship with
-----
all Assignees and Participants, pursuant to which Lender, as Agent
("Agent"), shall administer the Loan on behalf of itself as Lender and all
-----
Assignees and Participants. All payments to be made by Borrower under this
Agreement and the Subordinated Note shall be made to Agent, and all
communications by Borrower to Lender, Assignees and Participants shall be
addressed to or in the care of Agent, except that the financial information
which is required to be provided to Lender pursuant to Sections 5.01, 5.02
and 5.03 hereof shall also be sent directly to any Assignee and Participant
that holds at least 20% of the aggregate principal balance outstanding
under the Subordinated Note. Lender's rights as Agent shall not be
assignable, except that Lender may, in its discretion, be replaced as Agent
by another lending institution reasonably acceptable to Borrower.
(c) Effect on Financial Covenants. Notwithstanding anything
-----------------------------
herein to the contrary:
(i) The covenants set forth in Section 5.01(j), (k) and (l)
hereof are unique to, and solely for the benefit of, Lender. As a
result, if at any time Lender ceases to hold legally or beneficially
at least 66b% of the aggregate principal balance then outstanding
under the Subordinated Note, the covenants set forth in Section
5.01(j), (k), and (l) hereof shall automatically terminate and be of
no further force and effect, and Borrower shall thereafter have no
obligation hereunder to comply with any such covenant, and non-
compliance with such covenants shall thereafter cease to constitute an
Event of Default hereunder (and any existing Event of Default under
Section 6.01(e) as a result of a default under such covenants shall
automatically be deemed permanently cured and waived).
(ii) The covenants set forth in Section 5.01(j), (k) and (l)
hereof are unique to, and solely for the benefit of, Lender. As a
result, if at any time Lender assigns any portion of its interest in
and rights under, or grants any participating or beneficial interest
in, this Agreement and the Subordinated Note, but Lender continues to
hold legally and beneficially at least 66b% of the aggregate principal
balance outstanding under the Subordinated Note, then: (A) any default
under Section 5.01(j), (k) or (l) shall constitute an Event of Default
under Section 6.01(e) only and only for the benefit of Lender, and not
for the benefit of any Assignee or Participant; (B) any determination
to amend, modify or waive in accordance with Section 8.01(a) any
covenant set forth in Section 5.01(j), (k) or (l), or to accelerate
the Loan under Section 6.02(c) as a result of any default under
Section 5.01(j), (k) or (l), shall (subject to Section 8.01(b) below)
be made solely by Lender (and may not be made by any other holder of
any interest in the Loan), notwithstanding the fact that Lender may
have been replaced as Agent pursuant to Section 7.02(b) hereof; (C)
upon any such default under Section 5.01(j), (k) or (l) (to the extent
such covenants have not been terminated pursuant to subparagraph (i)
above), additional interest
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<PAGE>
under Section 2.03(b) as a result of such default shall accrue only
with respect to the portion of the Loan held by Lender (together with
all accrued and unpaid interest thereon and all other amounts, fees
and obligations then due and payable to Lender), and not with respect
to any portion of the Loan or other obligations held by any Assignee
or Participant (provided that nothing in this clause (C) shall prevent
--------
the accrual of additional interest under Section 2.03(b) on
obligations held by such Assignees and Participants if there has
occurred and is continuing any Event of Default other than a default
under Section 5.01(j), (k) or (l)); and (D) upon any determination by
Lender in accordance with this subparagraph (ii) to accelerate the
Loan under Section 6.02(c) as a result of any default under Section
5.01(j), (k) or (l), only the portion of the Loan held by Lender
(together with all accrued and unpaid interest thereon and all other
amounts, fees and obligations of Borrower hereunder and under the
Subordinated Note to Lender) shall be so accelerated, and not any
portion of the Loan or other obligations held by any Assignee or
Participant (provided that, notwithstanding the foregoing, any such
--------
acceleration by Lender of obligations in excess of $5.0 million in the
aggregate shall constitute an Event of Default under Section 6.01(b)
with respect to all Assignees and Participants, and the Agent (or, if
Lender is the Agent, the holders of a majority of the outstanding
principal amount of the Loan then held by all Assignees and
Participants) may upon such Event of Default elect under Section
6.02(c) to accelerate the portion of the Loan and other obligations
held by such Assignees and Participants).
(d) Two-Year Restriction. Prior to the second anniversary of the
--------------------
Closing Date, neither Lender nor any Assignee may assign any portion of its
interest in and rights under this Agreement and the Subordinated Note to
any other Person (other than an Affiliate of Lender) without Borrower's
prior consent, which consent will not be unreasonably withheld or delayed.
7.03 Payments; Set Off. Any payments to or recoveries by Lender or
-----------------
any Assignee or Participant under this Agreement or under any instrument or
agreement delivered in connection herewith shall be for the account of Lender
and all Assignees and Participants, in proportion to the amount of each such
person's interest in the Loan.
7.04 Further Assurance. Borrower shall, from time to time at the
-----------------
request of Lender, execute and deliver to Lender or to such party or parties as
Lender may designate, any and all further instruments as may in the opinion of
Lender be necessary or advisable to give full force and effect to any transfer
contemplated by this Article VII.
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ARTICLE VIII
MISCELLANEOUS
-------------
8.01 Modifications, Amendments or Waivers.
------------------------------------
(a) General. Except as expressly set forth in (b) below, the
-------
provisions of this Agreement and the Subordinated Note may be modified, amended
or waived, but only by a written instrument signed by Borrower and Lender.
(b) Certain Modifications, Amendments or Waivers of Financial
---------------------------------------------------------
Covenants. The parties hereto have drafted the covenants set forth in Section
- ---------
5.01(j), (k), and (l) hereof so as to replicate the corresponding covenants set
forth in Section 9.11 of the Senior Loan Agreement as in effect on the date
hereof, except that the maximum Leverage Ratio levels under Section 5.01(j) have
been set in this Agreement at 120% of the corresponding levels for such ratio
under the Senior Loan Agreement (as in effect on the date hereof), and the
minimum Interest Coverage Ratio and Fixed Charge Coverage Ratio levels under
Section 5.01(k) and (l), respectively, have been set in this Agreement at 80% of
the corresponding levels for such ratios under the Senior Loan Agreement (as in
effect on the date hereof). In the event that the Senior Lenders and Borrower
agree in writing pursuant to the terms of the Senior Loan Agreement to amend or
modify any of the Leverage Ratio, Interest Coverage Ratio, or Fixed Charge
Coverage Ratio covenants in the Senior Loan Agreement (the "Senior Financial
----------------
Covenants"), or any of the defined terms used therein (either directly or
- ---------
indirectly through other defined terms), Lender agrees that, contemporaneously
with such amendment or modification to the Senior Loan Agreement, the
corresponding covenant or defined term in this Agreement shall automatically
(and without further action on the part of Borrower, Lender or the Senior
Lenders) be amended or modified as follows:
(i) in the case of any amendment or modification to any
Leverage Ratio level with respect to any period in the Senior Loan
Agreement, the corresponding Leverage Ratio level with respect to the same
period in Section 5.01(j) hereof shall be changed to equal 120% of such
Senior Loan Agreement level (after giving effect to such amendment or
modification to the Senior Loan Agreement);
(ii) in the case of any amendment or modification to any
Interest Coverage Ratio level with respect to any period in the Senior Loan
Agreement, the corresponding Interest Coverage Ratio level with respect to
the same period in Section 5.01(k) hereof shall be changed to equal 80% of
the Senior Loan Agreement level (after giving effect to such amendment or
modification to the Senior Loan Agreement);
(iii) in the case of any amendment or modification to any Fixed
Charge Coverage Ratio level with respect to any period in the Senior Loan
Agreement, the corresponding Fixed Charge Coverage Ratio level with respect
to the same period in Section 5.01(l) hereof shall be changed to equal 80%
of the Senior Loan Agreement level (after giving effect to such amendment
or modification to the Senior Loan Agreement); and
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<PAGE>
(iv) in the case of any other such amendment or modification
under the Senior Loan Agreement, the same amendment or modification shall
be made to the corresponding covenant provision or definition, as
applicable, in this Agreement.
Notwithstanding the foregoing: (A) any such amendment or modification of this
Agreement shall be effective solely to the extent of the Senior Lenders'
amendment or modification of the corresponding provision in the Senior Loan
Agreement, (B) any such amendment or modification of this Agreement shall be
subject to the same terms and conditions as the Senior Lenders' amendment or
modification of the corresponding provision in the Senior Loan Agreement, except
to the extent that such terms and conditions do not relate to the Senior
Financial Covenants (it being understood that amendments or modifications to the
Senior Loan Agreement that are effected at the same time as any amendment or
modification of the Senior Financial Covenants and that are not direct
amendments or modifications of the Senior Financial Covenants or any defined
term directly or indirectly used therein are not terms and conditions "relating
to" the Senior Financial Covenants), and except that upon waiver or satisfaction
of any condition to such amendment or modification of the Senior Loan Agreement
such condition shall automatically be deemed satisfied with respect to the
amendment or modification of the corresponding provision under this Agreement,
(C) any such amendment or modification of this Agreement shall expire or be
rescinded, amended, or modified in the event such Senior Lenders' amendment or
modification of the Senior Loan Agreement expires or is so rescinded, amended or
modified (including by reason of the termination of the Senior Loan Agreement
after all obligations constituting Senior Debt have been paid in full in cash
and all commitments to extend credit under the Senior Loan Agreement that would
constitute Senior Debt have been terminated), and (D) in the event the Senior
Lenders (or any of their Affiliates) are entitled to receive any consideration
for delivering such amendment or modification, Lender (or its Affiliates) shall
be entitled to receive equivalent consideration in the same proportion to the
outstanding principal amount of the Loan as such consideration to be paid to the
Senior Lenders (or their Affiliates) bears to the total principal amount of the
Senior Debt and unutilized commitments to extend credit under the Senior Loan
Agreement that would constitute Senior Debt.
If the Senior Lenders execute a written waiver (in accordance with the terms of
the Senior Loan Agreement) of a default under a Senior Financial Covenant, such
Senior Lenders' waiver shall automatically, and without further action on the
part of Borrower, Lender or the Senior Lenders, operate as, and be deemed to be,
an effective waiver hereunder by Lender of such default under the corresponding
covenant in this Agreement; provided that (1) such deemed waiver by Lender shall
--------
be effective solely to the extent of the Senior Lenders' waiver of the default
under the corresponding provision in the Senior Loan Agreement, (2) such deemed
waiver by Lender shall be subject to the same terms and conditions as the Senior
Lenders' waiver of the default under the corresponding provision in the Senior
Loan Agreement, except to the extent that such terms and conditions do not
relate to the Senior Financial Covenants (it being understood that any waiver of
any provision under the Senior Loan Agreement that is effected at the same time
as any waiver of a default under the Senior Financial Covenants and that is not
a direct waiver of a default under the Senior Financial Covenants is not a term
or condition "relating to" the Senior Financial Covenants), and except that upon
waiver or satisfaction of any condition to the Senior Lenders' waiver of a
default under a Senior Financial Covenant such condition shall automatically be
deemed satisfied with respect to the deemed waiver by Lender of the
corresponding covenant in this Agreement, (3) such deemed waiver by Lender shall
expire or be rescinded, amended, or modified in the event such Senior Lenders'
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<PAGE>
waiver expires or is so rescinded, amended or modified (including by reason of
the termination of the Senior Loan Agreement after all obligations constituting
Senior Debt have been paid in full in cash and all commitments to extend credit
under the Senior Loan Agreement that would constitute Senior Debt have been
terminated), and (4) in the event the Senior Lenders (or any of their
Affiliates) are entitled to receive any consideration for delivering such
waiver, Lender (or its Affiliates) shall be entitled to receive equivalent
consideration in the same proportion to the outstanding principal amount of the
Loan as such consideration to be paid to the Senior Lenders (or their
Affiliates) bears to the total principal amount of the Senior Debt and
unutilized commitments to extend credit under the Senior Loan Agreement that
would constitute Senior Debt.
The provisions of this Section 8.01(b) are for the benefit of the
Senior Lenders, and the Senior Lenders may enforce the provisions of this
Section as third-party beneficiaries hereof. To the extent not otherwise
terminated pursuant to Sections 7.02(c) or 8.01 hereto, the covenants set forth
in Section 5.01(j), (k) and (l) shall survive the payment in full of the Senior
Debt and the termination of the Senior Loan Agreement.
8.02 No Implied Waivers; Cumulative Remedies; Writing Required. No
---------------------------------------------------------
delay or failure of Lender in exercising any right, power or remedy under this
Agreement or the Subordinated Note shall affect or operate as a waiver thereof,
nor shall any single or partial exercise thereof or any abandonment or
discontinuance of steps to enforce such a right, power or remedy preclude any
further exercise thereof or of any other right, power or remedy. The rights and
remedies of Lender under this Agreement and the Subordinated Note are cumulative
and not exclusive of any rights or remedies which it or they would otherwise
have. Except as expressly set forth in Section 8.01(b), any waiver, permit,
consent or approval of any kind or character on the part of Lender of any breach
or default or any such waiver of any provision or condition of this Agreement or
the Subordinated Note must be in writing and shall be effective only to the
extent in such writing specifically set forth.
8.03 Reimbursement of Expenses; Taxes. Borrower shall upon demand pay
--------------------------------
or reimburse Lender for all reasonable out-of-pocket expenses, including fees
and expenses of counsel for Lender, from time to time (i) arising in connection
with the preparation and execution of this Agreement, the Subordinated Note, and
all other instruments and documents to be delivered hereunder, (ii) relating to
any amendments, waivers or consents pursuant to the provisions hereof or
thereof, (iii) arising in connection with any merger involving Borrower or any
of its Subsidiaries, any acquisition by Borrower or any of its Subsidiaries, any
sale of Borrower or any of its Subsidiaries or any partial or total repayment of
the Loans, (iv) arising in connection with the enforcement of the provisions of
this Agreement, the Subordinated Note, and all other agreements to be delivered
hereunder or the collection of the Subordinated Note, and (v) incurred in
connection with any matter relating to the matters contemplated by this
Agreement as to which Lender seeks advice of counsel. Borrower shall pay and
save Lender harmless from all liability for any stamp or other similar taxes
which may be payable in connection with this Agreement, the Senior Notes or the
other Senior Loan Documents or the performance of any transactions contemplated
hereby or thereby (but excluding any franchise tax, income tax, gross receipts
tax or other similar tax).
8.04 Holidays. Whenever any payment or action to be made or taken
--------
hereunder or under the Subordinated Note shall be stated to be due on a day
which is not a Business Day, such payment or action shall be made or taken on
the next following Business Day, and such extension
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<PAGE>
of time shall be included in computing interest or fees, if any, in connection
with such payment or action.
8.05 Notices. All notices and other communications given to or made
-------
upon any party hereto in connection with this Agreement, the Subordinated Note
and the Subordinated Guaranty shall be in writing and shall be deemed to have
been given when delivered personally to the recipient, when telecopies to the
recipient (with hard copy sent by overnight courier in the manner required
hereunder) if sent prior to 4:00 p.m. New York time on a business day (and
otherwise, on the immediately succeeding business day), one business day after
being sent to the recipient by reputable overnight courier service (charges
prepaid), or three business days after being mailed to the recipient by
certified or registered mail, return receipt requested and postage prepaid.
Such notices, demands and other communications shall be sent to the respective
parties as follows:
To Borrower: Norwood Promotional Products, Inc.
106 East Sixth Street, Suite 300
Austin, Texas 78701
Attention: CFO
Telecopy: (512) 477-8603
with copies to: Richard J. McMahon
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Telecopy: (215) 569-5628
William R. Volk
Hughes & Luce, L.L.P.
111 Congress Avenue, Suite 900
Austin, TX 78701
Telecopy: (512) 482-6859
To Lender: c/o Liberty Capital Partners, Inc.
Americas Towers, 34th Floor
1177 Avenue of the Americas
New York, New York 10036
Attention: Paul J. Huston
Telecopy: (212) 354-0336
with a copy to: Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Edward T. Swan
Telecopy: (312) 861-2200
or in accordance with any subsequent written direction from the recipient party
to the sending party.
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<PAGE>
8.06 Survival. All representations, warranties, covenants and
--------
agreements of Borrower contained herein or made in writing in connection
herewith shall survive the execution and delivery of this Agreement, the making
of the Loan hereunder and the issuance of the Subordinated Note. The provisions
of this Article VIII shall survive repayment of the Loan and the other amounts
payable to Lender hereunder and the termination of this Agreement.
8.07 GOVERNING LAW; WAIVERS AND JURISDICTION.
---------------------------------------
(A) GOVERNING LAW. THIS AGREEMENT AND THE SUBORDINATED NOTE SHALL IN
-------------
ALL RESPECTS BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR
CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF NEW YORK OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(B) WAIVERS. TO THE EXTENT PERMITTED BY LAW, BORROWER HEREBY WAIVES
-------
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY CERTIFIED REGISTERED MAIL DIRECTED TO IT AT ITS
ADDRESS SET FORTH IN SECTION 8.05 HEREOF, AND SERVICE SO MADE SHALL BE DEEMED TO
BE COMPLETED THREE BUSINESS DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE
U.S. MAILS, POSTAGE PREPAID. IN ADDITION, BORROWER AND LENDER EACH HEREBY WAIVE
TRIAL BY JURY, ANY OBJECTIONS BASED ON FORUM NON CONVENIENS AND ANY OBJECTIONS
----- --- ----------
TO VENUE OF ANY ACTION ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL
TO THE TRANSACTIONS CONTEMPLATED BY OR THE RELATIONSHIPS ESTABLISHED IN
CONNECTION WITH THIS AGREEMENT OR THE SUBORDINATED NOTE.
(C) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SECTION 8.07(D),
----------------------
ALL DISPUTES AMONG OR BETWEEN LENDER AND BORROWER ARISING OUT OF, CONNECTED
WITH, RELATED TO OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED BY OR THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT AND THE
SUBORDINATED NOTE, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE,
SHALL BE RESOLVED ONLY BY STATE OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY,
NEW YORK, AND BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN SUCH COUNTY AND STATE. LENDER AND
BORROWER ACKNOWLEDGE, HOWEVER, THAT ANY APPEALS FROM THOSE COURTS MAY BE
REQUIRED TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK COUNTY, NEW YORK.
BORROWER WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION
OF THE COURT CONSIDERING THE DISPUTE. NOTHING IN THIS SECTION 8.07 SHALL AFFECT
THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR AFFECT THE RIGHT OF LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER
OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
(D) OTHER JURISDICTIONS. BORROWER AGREES THAT LENDER SHALL HAVE THE
-------------------
RIGHT TO PROCEED AGAINST BORROWER IN A COURT IN ANY LOCATION TO ENABLE LENDER TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF LENDER. BORROWER
WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH
LENDER HAS COMMENCED A PROCEEDING DESCRIBED IN THIS SECTION 8.07(D).
8.08 Descriptive Headings; Interpretation; No Strict Construction.
-------------------------------------------------------------
The descriptive headings of this Agreement are inserted for convenience only and
do not constitute a substantive part
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<PAGE>
of this Agreement. Whenever required by the context, any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular forms of nouns, pronouns, and verbs shall include the plural
and vice versa. Reference to any agreement, document, or instrument means such
agreement, document, or instrument as amended or otherwise modified from time to
time in accordance with the terms thereof, and if applicable hereof. Words such
as "herein," "hereunder," "hereof" and the like shall be deemed to refer to this
Agreement as a whole and not to any particular document or Article, Section or
other portion of a document. The use of the words "include" or "including" in
this Agreement shall be by way of example rather than by limitation. The use of
the words "or," "either" or "any" shall not be exclusive. As used herein,
"ordinary course of business" means the ordinary course of business, consistent
with past practices, including as to quality and frequency. The "knowledge" or
"awareness" of a Person means the actual knowledge of such Person (which
includes the actual knowledge of all officers, directors and executive employees
of such Person after reasonable inquiry). The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement. The parties agree that
prior drafts of this Agreement shall be deemed not to provide any evidence as to
the meaning of any provision hereof or the intent of the parties hereto with
respect hereto.
8.09 Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law in any jurisdiction, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating any other provision of this Agreement.
8.10 Counterparts. This Agreement may be executed in multiple
------------
counterparts and by either party hereto on separate counterparts, each of which,
when so executed and delivered, shall be an original, but all such counterparts
shall together constitute one and the same instrument.
8.11 Brokers Fees. Borrower shall indemnify Lender and hold it
------------
harmless for any liability, loss or expense (including reasonable attorneys'
fees) arising from any claim for brokerage commissions, finders' fees or similar
compensation in connection with any agreement or arrangement binding upon
Borrower, any of its Subsidiaries or any of their employees.
8.12 Indemnification.
---------------
(a) General. In consideration of Lender's execution and delivery of
-------
this Agreement and Lender's making of the Loans hereunder and in addition to all
other obligations of Borrower under this Agreement, Borrower shall defend,
protect, indemnify and hold harmless Lender, its Assignees and Participants, and
all of their officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "Indemnitees") from and against any and all
-----------
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and
disbursements,
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but excluding claims and losses arising from Lender's breach hereof or Lender's
gross negligence or willful misconduct (the "Indemnified Liabilities"), incurred
-----------------------
by the Indemnitees or any of them as a result of, or arising out of, or relating
to (i) any transaction financed or to be financed in whole or in part, directly
or indirectly, with the proceeds of the Loans, (ii) the execution, delivery,
performance or enforcement of this Agreement, the Subordinated Note or any
instrument, document or agreement executed pursuant hereto by any of the
Indemnitees, (iii) any breach of any covenant, agreement, representation or
warranty of Borrower under this Agreement or any instrument, document or
agreement contemplated hereby to which Borrower is a party or (iv) Lender's
status as a lender to Borrower. To the extent that the foregoing undertaking by
Borrower may be unenforceable for any reason, Borrower shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
(b) Environmental Liabilities. Without limiting the generality of the
-------------------------
indemnity set out in Section 8.12(a) above, Borrower hereby further agrees to
defend, protect, indemnify and hold harmless Lender and all other Indemnitees
from and against any and all actions, causes of action, suits, losses,
liabilities, damages, injuries, penalties, fees, costs, expenses and claims of
any and every kind whatsoever paid, incurred or suffered by, or asserted
against, Lender or any other Indemnitee for, with respect to, or as a direct or
indirect result of, the past, present or future environmental condition of any
property owned, operated or used by Borrower, any Subsidiary, their predecessors
or successors or of any offsite treatment, storage or disposal location
associated therewith, including, without limitation, the presence on or under,
or the escape, seepage, leakage, spillage, discharge, emission, release, or
threatened release into, onto or from, any such property or location of any
toxic, chemical or hazardous substance, material or waste (including, without
limitation, any losses, liabilities, damages, injuries, penalties, fees, costs,
expenses or claims asserted or arising under the Comprehensive Environmental
Response, Compensation and Liability Act, any so-called "Superfund" or
"Superlien" law, or any other federal, state, local or foreign statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to or
imposing liability or standards on conduct concerning, any toxic, chemical or
hazardous substance, material or waste), regardless of whether caused by, or
within the control of, Borrower or any Subsidiary; provided that Borrower shall
--------
have no obligation to indemnify Lender for environmental conditions solely to
the extent caused or created by Lender after it has taken possession of the
property by foreclosure or otherwise.
8.13 Payment Set Aside. To the extent that Borrower makes a payment
-----------------
or payments to Lender hereunder or under the Subordinated Note or Lender
enforces its rights or exercises its right or setoff hereunder or thereunder,
and such payment or payments or the proceeds of such enforcement or setoff or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to Borrower, a trustee, receiver or any
other Person under any law (including, without limitation, any bankruptcy law,
state or federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.
8.14 Complete Agreement. Except as otherwise expressly set forth
------------------
herein, this Agreement, the Subordinated Note and the other agreements expressly
contemplated hereby embody
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<PAGE>
the complete agreement and understanding of the parties hereto and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, whether written or oral, which may have related to the subject matter
hereof in any way, and such agreements may not be contradicted or varied by
evidence of prior, contemporaneous or subsequent oral discussions or
understandings of the parties. The parties hereto acknowledge and agree there
are no oral understandings or agreements between them with respect to the
subject matter hereof.
8.15 Public Disclosures. Borrower shall not, nor shall it permit any
------------------
Subsidiary to, disclose Lender's name or identity as a creditor of Borrower in
any press release or other public announcement or in any document or material
filed with any governmental entity, without the prior written consent of Lender,
unless such disclosure is required by applicable law or governmental regulations
or by order of a court of competent jurisdiction, in which case prior to making
such disclosure Borrower shall give written notice to Lender describing in
reasonable detail the proposed content of such disclosure and shall permit
Lender to review and comment upon the form and substance of such disclosure.
8.16 Schedules. Nothing in any Schedule attached hereto shall be
---------
adequate to disclose an exception to a representation or warranty made in this
Agreement unless such Schedule identifies the exception with particularity and
describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be adequate to disclose an exception to a
representation or warranty made in this Agreement, unless the representation or
warranty has to do with the existence of such document or such other item
itself.
8.17 Delivery by Facsimile. This Agreement, the agreements referred
---------------------
to herein, and each other agreement or instrument entered into in connection
herewith or therewith or contemplated hereby or thereby, and any amendments
hereto or thereto, to the extent signed and delivered by means of a facsimile
machine, shall be treated in all manner and respects as an original agreement or
instrument and shall be considered to have the same binding legal effect as if
it were the original signed version thereof delivered in person. At the request
of any party hereto or to any such agreement or instrument, each other party
hereto or thereto shall reexecute original forms thereof and deliver them to all
other parties. No party hereto or to any such agreement or instrument shall
raise the use of a facsimile machine to deliver a signature or the fact that any
signature or agreement or instrument was transmitted or communicated through the
use of a facsimile machine as a defense to the formation or enforceability of a
contract and each such party forever waives any such defense.
* * * * *
-51-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Agreement as of the day and year first above
written.
Attest: NORWOOD PROMOTIONAL PRODUCTS, INC.
By: ___________________________ By: ___________________________
Title: _________________________ Its: ___________________________
THE STATE BOARD OF ADMINISTRATION OF
FLORIDA
By: LIBERTY PARTNERS, L.P.
Its: Attorney-in-Fact
By: LIBERTY CAPITAL PARTNERS, INC.
Its: General Partner
By: ___________________________
Its: Managing Director
[Signature Page to Subordinated Loan Agreement]
<PAGE>
EXHIBIT B-3
================================================================================
STOCK AND WARRANT PURCHASE AGREEMENT
------------------------------------
DATED AS OF OCTOBER 30, 1998
BY AND AMONG
THE STATE BOARD OF ADMINISTRATION OF FLORIDA
LIBERTY PARTNERS HOLDINGS 17, L.L.C.
AND
NORWOOD PROMOTIONAL PRODUCTS, INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. Authorization and Closing........................................................................... 1
1A. Authorization of the Stock and the Warrants................................................ 1
1B. Purchase and Sale of the Stock and the Warrants............................................ 1
1C. The Closing................................................................................ 2
2. Conditions of Each Purchaser's Obligation at the Closing................................................. 2
2A. Representations and Warranties; Covenants.................................................. 2
2B. Certificate of Designation................................................................. 2
2C. Articles of Incorporation.................................................................. 2
2D. Amendment of the Company's Bylaws.......................................................... 2
2E. Merger Agreement........................................................................... 2
2F. Senior Loan Agreement...................................................................... 3
2G. Subordinated Loan Agreement................................................................ 3
2H. Shareholders' Agreement.................................................................... 3
2I. Registration Agreement..................................................................... 3
2J. Sale of the Securities to the Purchasers................................................... 3
2K. Securities Law Compliance.................................................................. 3
2L. Compliance with Applicable Laws............................................................ 3
2M. Material Adverse Change.................................................................... 4
2N. Opinion of the Company's Counsel........................................................... 4
2O. Expenses................................................................................... 4
2P. Closing Documents.......................................................................... 4
2Q. Proceedings................................................................................ 5
2R. Waiver..................................................................................... 5
3. Covenants ........................................................................................... 5
3A. Financial Statements and Other Information................................................. 5
3B. Inspection of Property..................................................................... 8
3C. Preferred Stock Restrictive Covenants...................................................... 8
3D. Preferred Stock Affirmative Covenants...................................................... 11
3E. Purchaser Common Stock Restrictive Covenants............................................... 12
3F. Compliance with Agreements................................................................. 13
3G. Current Public Information................................................................. 14
3H. Limited Rights of First Refusal............................................................ 14
3I. Public Disclosures......................................................................... 15
4. Transfer of Restricted Securities................................................................... 15
4A. General Provisions......................................................................... 15
4B. Opinion Delivery........................................................................... 15
4C. Rule 144A.................................................................................. 16
4D. Legend Removal............................................................................. 16
4E. Two-Year Restriction; Effect of Transfer on Certain Covenants.............................. 16
</TABLE>
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<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
5. Representations and Warranties of the Company....................................................... 16
5A. Organization, Corporate Power and Licenses................................................. 16
5B. Capital Stock and Related Matters.......................................................... 17
5C. Subsidiaries; Investments.................................................................. 17
5D. Authorization; Noncontravention............................................................ 18
5E. Financial Statements....................................................................... 18
5F. Absence of Undisclosed Liabilities......................................................... 19
5G. No Material Adverse Change................................................................. 19
5H. Absence of Certain Developments............................................................ 19
5I. Assets..................................................................................... 20
5J. Tax Matters................................................................................ 21
5K. Contracts and Commitments.................................................................. 22
5L. Intellectual Property Rights............................................................... 23
5M. Litigation, etc............................................................................ 24
5N. Brokerage.................................................................................. 25
5O. Governmental Consent, etc.................................................................. 25
5P. Insurance.................................................................................. 25
5Q. Employees.................................................................................. 25
5R. Employee Benefit Plans..................................................................... 26
5S. Compliance with Laws....................................................................... 27
5T. Environmental and Safety Matters........................................................... 27
5U. Affiliated Transactions.................................................................... 28
5V. Reports with the Securities and Exchange Commission........................................ 28
5W. Disclosure................................................................................. 29
5X. Closing Date............................................................................... 29
6. Definitions ........................................................................................... 29
7. Miscellaneous ........................................................................................... 34
7A. Expenses................................................................................... 34
7B. Remedies................................................................................... 34
7C. Purchaser's Investment Representations..................................................... 34
7D. Acknowledgment Relating to the Preferred Stock............................................. 36
7E. Indemnification............................................................................ 36
7F. Consent to Amendments...................................................................... 37
7G. Survival of Representations and Warranties................................................. 38
7H. Successors and Assigns..................................................................... 38
7I. Severability............................................................................... 38
7J. Counterparts............................................................................... 38
7K. Descriptive Headings; Interpretation; No Strict Construction............................... 38
7L. GOVERNING LAW.............................................................................. 39
7M. Notices.................................................................................... 39
7N. Complete Agreement......................................................................... 40
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
7O. Schedules.................................................................................. 40
7P. Delivery by Facsimile...................................................................... 40
</TABLE>
-iii-
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit A - Certificate of Designation
Exhibit B - Articles of Incorporation
Exhibit C - Series A Warrant
Exhibit D - Series B Warrant
Exhibit E - Amended and Restated Bylaws
Exhibit F - Shareholders' Agreement
Exhibit G - Registration Agreement
Exhibit H - Opinion of Counsel
-iv-
<PAGE>
LIST OF DISCLOSURE SCHEDULES
----------------------------
Capitalization Schedule
Subsidiary Schedule
Restrictions Schedule
Liabilities Schedule
Developments Schedule
Assets Schedule
Taxes Schedule
Contracts Schedule
Intellectual Property Schedule
Litigation Schedule
Brokerage Schedule
Consents Schedule
Insurance Schedule
Employees Schedule
Employee Benefits Schedule
Compliance Schedule
Environmental Schedule
Affiliated Transactions Schedule
-v-
<PAGE>
NORWOOD PROMOTIONAL PRODUCTS, INC.
STOCK AND WARRANT PURCHASE AGREEMENT
------------------------------------
THIS AGREEMENT is made as of October 30, 1998, by and between Norwood
Promotional Products, Inc., a Texas corporation (the "Company"), The State Board
-------
of Administration of Florida ("SBAF") and Liberty Partners Holdings 17, L.L.C.,
----
a Delaware limited liability company ("Liberty" and, collectively with SBAF, the
-------
"Purchasers"). Capitalized terms used but not otherwise defined herein shall
----------
have the meanings ascribed to such terms in Section 6 hereof.
NOW, THEREFORE, in consideration of the mutual promises made herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound
hereby, covenant and agree as follows:
SECTION 1. AUTHORIZATION AND CLOSING.
-------------------------
a. Authorization of the Stock and the Warrants. The Company shall
-------------------------------------------
authorize the issuance and sale (i) to SBAF of 20,000 shares of its Series A
Preferred Stock, par value $.01 per share (the "Preferred Stock"), having the
---------------
rights and preferences set forth in the Certificate of Designation set forth in
Exhibit A attached hereto, and (ii) to Liberty of: (A) 144,928 shares of its
- ---------
Common Stock, par value $.01 per share (the "Common Stock" and, collectively
------------
with the Preferred Stock, the "Stock"), having the rights and preferences set
-----
forth in the Articles of Incorporation set forth in Exhibit B attached
---------
hereto,(B) a stock purchase warrant initially exercisable for an aggregate of
565,966 shares of Common Stock, having the terms and conditions and in the form
set forth in Exhibit C attached hereto (the "Series A Warrant"), and (C) a stock
--------- ----------------
purchase warrant initially exercisable for an aggregate of 424,474 shares of
Common Stock, having the terms and conditions and in the form set forth in
Exhibit D attached hereto (the "Series B Warrant" and, collectively with the
- --------- ----------------
Series A Warrant, the "Warrants"). The Stock and the Warrants are referred to
--------
herein collectively as the "Securities."
----------
b. Purchase and Sale of the Stock and the Warrants. At the Closing
-----------------------------------------------
(as defined below), the Company shall sell to each Purchaser and, subject to the
terms and conditions set forth herein, each Purchaser shall purchase from the
Company, the number and type of Securities set forth opposite such Purchaser's
name on the Schedule of Purchasers attached hereto for the purchase price set
----------------------
forth with respect thereto on the Schedule of Purchasers. Each of the
----------------------
Purchasers and the Company acknowledges and agrees that the fair market value of
the Warrants issued hereunder shall be as set forth on the attached Schedule of
-----------
Purchasers and that, for all purposes (including tax and accounting), the
- ----------
consideration for the issuance of the Warrants shall be allocated as set forth
on the attached Schedule of Purchasers. Each of the Purchasers and the Company
----------------------
shall file, and the Company shall cause each of its Subsidiaries to file, their
respective federal, state and local tax returns in a manner which is consistent
with such valuation and allocation and shall not take any action or position
(whether in preparation of tax returns, financial statements or otherwise) which
is inconsistent with any of the above.
<PAGE>
c. The Closing. The closing of the purchases and sales of the Stock
-----------
and the Warrants (the "Closing") shall take place at the offices of Cahill
-------
Gordon & Reindel in New York City on the date hereof, or at such other place or
on such other date as may be mutually agreeable to the Company and the
Purchasers (the date on which the Closing occurs, the "Closing Date"). Each of
------------
the transactions to be consummated at the Closing shall be deemed to occur
simultaneously with the "Effective Time" of the closing under the Merger
Agreement (as defined in paragraph 2E below). At the Closing, the Company shall
deliver to each Purchaser stock certificates evidencing the Preferred Stock and
Common Stock and the Warrants to be purchased by such Purchaser at the Closing,
each registered in such Purchaser's or its nominee's name, upon payment of the
purchase price therefor by wire transfer of immediately available funds to an
account designated by the Company prior to the Closing in the aggregate amount
set forth opposite such Purchaser's name on the Schedule of Purchasers.
----------------------
SECTION 2. CONDITIONS OF EACH PURCHASER'S OBLIGATION AT THE
------------------------------------------------
CLOSING. The obligation of the Purchasers to purchase and pay for the Securities
- --------
at the Closing is subject to the satisfaction as of the Closing of the following
conditions:
a. Representations and Warranties; Covenants. The representations
-----------------------------------------
and warranties contained in Section 5 hereof shall be true and correct in all
material respects at and as of the Closing as though then made, except to the
extent of changes caused by the transactions expressly contemplated herein, and
the Company shall have performed in all material respects all of the covenants
required to be performed by it hereunder prior to the Closing.
b. Certificate of Designation. The Company shall have duly adopted,
--------------------------
executed and filed with the Secretary of State of Texas a Certificate of
Designation establishing the terms and the relative rights and preferences of
the Preferred Stock in the form set forth in Exhibit A hereto (the "Certificate
--------- -----------
of Designation"), and the Company shall not have adopted or filed any other
- --------------
document designating terms, relative rights or preferences of its preferred
stock. The Certificate of Designation shall be in full force and effect as of
the Closing under the laws of the State of Texas and shall not have been amended
or modified.
c. Articles of Incorporation. The Company's Articles of
-------------------------
Incorporation shall be in form and substance as previously delivered to the
Purchasers, a copy of which is attached hereto as Exhibit B (the "Articles of
--------- -----------
Incorporation"), shall be in full force and effect under the laws of the State
- --------------
of Texas as of the Closing and shall not have been further amended or modified.
d. Amendment of the Company's Bylaws. The Company's bylaws shall
---------------------------------
have been duly amended to include the provisions set forth in Exhibit E attached
---------
hereto (as so amended, the "Bylaws"), shall be in full force and effect as of
------
the Closing as so amended and shall not have been further amended or modified.
e. Merger Agreement. The Merger Agreement dated as of March 15,
----------------
1998, as amended (the "Merger Agreement"), by and between the Company and FPK,
----------------
LLC, a Delaware limited liability company ("FPK"), shall be in form and
---
substance satisfactory to the Purchasers, shall be in full force and effect as
of the Closing and shall not have been further amended or modified. All
conditions to the obligations of the parties thereto shall have been satisfied
in full (without waiver
-2-
<PAGE>
thereof, other than the waiver by the parties of the condition relating to
Financing (as that term is defined in the Merger Agreement)), and the
transactions contemplated by the Merger Agreement (the "Merger") shall have been
------
consummated simultaneously with the Closing hereunder in accordance with the
terms of the Merger Agreement.
f. Senior Loan Agreement. The Senior Loan Agreement shall be in form
---------------------
and substance satisfactory to the Purchasers, shall have been duly authorized,
executed and delivered by the Company and/or its Subsidiaries, shall be in full
force and effect as of the Closing and shall not have been amended or modified.
All conditions to the obligations of the Senior Lenders to make loans under the
Senior Loan Agreement shall have been satisfied in full (without waiver
thereof), and the loans to be made thereunder by the Senior Lenders at the
Closing shall have been advanced to the Company simultaneously with the Closing
hereunder in accordance with the terms of the Senior Loan Agreement.
g. Subordinated Loan Agreement. The Subordinated Loan Agreement
---------------------------
shall have been duly authorized, executed and delivered by the Company and/or
its Subsidiaries and shall be in full force and effect as of the Closing. All
conditions to the obligations of the Subordinated Lender to make loans under the
Subordinated Loan Agreement shall have been satisfied in full (without waiver
thereof), and the loans to be made thereunder by the Subordinated Lender at the
Closing shall have been advanced to the Company simultaneously with the Closing
hereunder in accordance with the terms of the Subordinated Loan Agreement.
h. Shareholders' Agreement. The Company, Liberty and the other
-----------------------
holders of the Company's Common Stock immediately after giving effect to the
Merger (the "Other Stockholders") shall have entered into a shareholders'
------------------
agreement in form and substance as set forth in Exhibit F attached hereto (the
---------
"Shareholders' Agreement"), and the Shareholders' Agreement shall be in full
-----------------------
force and effect as of the Closing.
i. Registration Agreement. The Company, Liberty and the Other
----------------------
Stockholders shall have entered into a registration agreement in form and
substance as set forth in Exhibit G attached hereto (the "Registration
--------- ------------
Agreement"), and the Registration Agreement shall be in full force and effect as
of the Closing.
j. Sale of the Securities to the Purchasers. The Company shall have
----------------------------------------
simultaneously sold to each Purchaser the Securities to be purchased by such
Purchaser hereunder at the Closing and shall have received payment therefor in
full.
k. Securities Law Compliance. The Company shall have made all
-------------------------
filings under all applicable federal and state securities laws necessary to
consummate in compliance with such laws all issuances of Stock, Warrants and
other securities (including the Common Stock issuable upon exercise of the
Warrants) pursuant to this Agreement or as contemplated hereby.
l. Compliance with Applicable Laws. The purchase of the Securities
-------------------------------
by each Purchaser hereunder shall not be prohibited by any applicable law or
governmental rule or regulation and shall not subject such Purchaser to any
penalty, liability or, in such Purchaser's sole judgment, other onerous
condition under or pursuant to any applicable law or governmental rule or
regulation,
-3-
<PAGE>
and the purchase of the Securities by each Purchaser hereunder shall be
permitted by laws, rules and regulations of the jurisdictions and governmental
authorities and agencies to which such Purchaser is subject.
m. Material Adverse Change. Since August 30, 1997, there shall not
-----------------------
have occurred any Material Adverse Effect or any condition or event that in the
reasonable judgment of the Purchasers could be expected to result (either
individually or in the aggregate) in a Material Adverse Effect (both before and
after giving effect to the Merger and the other transactions contemplated
hereby), and no Event of Noncompliance shall have occurred or shall exist.
n. Opinion of the Company's Counsel. The Purchasers shall have
--------------------------------
received from Hughes & Luce, LLP, counsel for the Company, and Blank Rome
Comisky & McCauley LLP, counsel for FPK, as applicable, an opinion with respect
to the matters set forth in Exhibit H attached hereto, which shall be addressed
---------
to the Purchasers, dated the date of the Closing and in form and substance
reasonably satisfactory to the Purchasers and their special counsel.
o. Expenses. At the Closing, the Company shall have paid all fees
--------
and expenses required to be paid pursuant to paragraph 7A hereof.
p. Closing Documents. The Company shall have delivered to the
-----------------
Purchasers all of the following documents:
i. an Officer's Certificate, dated the date of the Closing,
stating that the conditions specified in Section 1 and paragraphs 2A
through 2M, inclusive, have been fully satisfied;
ii. certified copies of the resolutions duly adopted by the
Company's board of directors authorizing (a) the execution, delivery and
performance of this Agreement, the Shareholders' Agreement, the
Registration Agreement, the Senior Loan Agreement, the Subordinated Loan
Agreement, the Merger Agreement and each of the other agreements
contemplated hereby and thereby, (b) the filing of the Certificate of
Designation referred to in paragraph 2B, (c) the amendment to the Company's
Bylaws referred to in paragraph 2D, (d) the issuance and sale of the
Securities to the Purchasers at the Closing, (e) the reservation for
issuance upon exercise of the Warrants of an aggregate of 990,440 shares of
Common Stock and (f) the consummation of all other transactions
contemplated by this Agreement;
iii. certified copies of the Articles of Incorporation, the
Certificate of Designation and the Bylaws, each as in effect at the
Closing;
iv. duly completed and executed copies of the Merger Agreement,
the Senior Loan Agreement, the Subordinated Loan Agreement, the
Shareholders' Agreement and the Registration Agreement, each as in effect
at the Closing;
v. copies of all third party and governmental consents,
approvals and filings required in connection with the consummation of the
transactions under this Agreement (including, without limitation, all blue
sky law filings and waivers of all
-4-
<PAGE>
preemptive rights and rights of first refusal), the Merger Agreement and
the other agreements described herein and therein; and
vi. such other documents relating to the transactions
contemplated by this Agreement as the Purchasers or their special counsel
may reasonably request.
q. Proceedings. All corporate and other proceedings taken or
-----------
required to be taken by the Company in connection with the transactions
contemplated hereby to be consummated at or prior to the Closing and all
certificates, opinions, instruments and other documents required to be delivered
by the Company to effect the transactions contemplated hereby will be
satisfactory in form and substance to the Purchasers and their special counsel.
r. Waiver. Any condition specified in this Section 2 may be waived
------
if consented to by the Purchasers; provided that no such waiver shall be
effective against the Purchasers unless it is set forth in a writing executed by
the Purchasers.
SECTION 3. COVENANTS.
---------
a. Financial Statements and Other Information. The Company shall
------------------------------------------
deliver to the Purchasers (so long as any Purchaser holds any Preferred Stock or
Purchaser Common Stock), to each subsequent holder of at least 25% of the
Preferred Stock then outstanding and to each subsequent holder of at least 25%
of the Purchaser Common Stock then in existence (each such Purchaser and each
other such holder, a "Qualified Holder"):
----------------
i. as soon as practicable but in any event within 30 days after
the end of each monthly accounting period in each fiscal year, unaudited
consolidated statements of income and cash flows of the Company and its
Subsidiaries for such monthly period and for the period from the beginning
of the fiscal year to the end of such month, and an unaudited consolidated
balance sheet of the Company and its Subsidiaries as of the end of such
monthly period, setting forth in each case comparisons to the Company's
annual budget and to the corresponding period in the preceding fiscal year,
all in reasonable detail, and all such statements shall be prepared in
accordance with generally accepted accounting principles, consistently
applied (subject to the absence of footnote disclosures and to normal year-
end adjustments for recurring accruals) and shall be certified by the
Company's chief financial officer; in addition, the Company will provide
consolidating financial statements for any Subsidiary organized outside of
the United States (as defined in Section 7701(a)(9) of the IRC) for the
same periods substantially consistent with the foregoing;
ii. as soon as practicable but in any event within 90 days after
the end of each fiscal year, consolidated statements of income, cash flows
and stockholders' equity of the Company and its Subsidiaries for such
fiscal year, and a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such fiscal year, setting forth in each case
comparisons to the Company's annual budget and to the preceding fiscal
year, all in reasonable detail, and all such statements shall be prepared
in accordance with generally accepted accounting principles, consistently
applied, and shall be accompanied by (a) an opinion from an independent
public accounting firm of recognized national standing, which
-5-
<PAGE>
opinion shall contain no material exceptions, qualifications or limitations
not reasonably satisfactory to the Purchasers, (b) a certificate from such
accounting firm, addressed to the Company's Board of Directors, stating
that it has caused the provisions of this Agreement to be reviewed and that
in the course of its examination nothing has come to its attention to lead
it to believe that any Event of Noncompliance or Potential Event of
Noncompliance has occurred or is in existence or, if such is not the case,
specifying in reasonable detail the nature and period of existence thereof,
and (c) a copy of such firm's annual management letter to the Company's
Board of Directors; in addition, the Company shall provide consolidating
financial statements for any Subsidiary organized outside of the United
States (as defined in Section 7701(a)(9) of the Internal Revenue Code) for
the same periods substantially consistent with the foregoing. Each of the
financial statements referred to in paragraphs (i) and (ii) shall be true
and correct in all material respects as of the dates and for the periods
stated therein, subject in the case of unaudited financial statements to
changes resulting from normal year-end adjustments for recurring accruals
(none of which would, alone or in the aggregate, have a Material Adverse
Effect);
iii. together with (a) the financial statements furnished
pursuant to paragraph 3A(i) for the third monthly accounting period in each
fiscal quarter and (b) the annual financial statements furnished pursuant
to paragraph 3A(ii), there shall be delivered to each Qualified Holder an
Officer's Certificate signed by the Company's chief financial officer
stating that he has caused the provisions of this Agreement to be reviewed
and that nothing has come to his attention to lead him to believe that any
Event of Noncompliance or Potential Event of Noncompliance has occurred or
exists hereunder or, if such is not the case, specifying in reasonable
detail the nature and period of existence thereof and what actions the
Company and its Subsidiaries have taken, are taking and propose to take
with respect thereto;
iv. promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning significant
aspects of the operations or financial affairs of the Company or any of its
Subsidiaries given to the Company by its independent accountants (and not
otherwise contained in other materials provided hereunder);
v. within 60 days after the end of each fiscal year, an annual
operating budget prepared on a monthly basis for the Company and its
Subsidiaries for the succeeding fiscal year (displaying anticipated
statements of income and cash flows and balance sheets) and an annual
capital budget for the Company and its Subsidiaries for the succeeding
fiscal year (displaying anticipated expenditures for capital assets), and
promptly upon preparation thereof any other significant budgets prepared by
the Company and any revisions of such annual or other budgets; and within
30 days after any monthly period in which there is a material adverse
deviation from the annual budgets, an Officer's Certificate from the
Company's chief financial officer or president explaining in reasonable
detail the deviation and what actions the Company and its Subsidiaries have
taken, are taking and propose to take with respect thereto;
-6-
<PAGE>
vi. as soon as possible (but in any event within five business
days) after the discovery or receipt of notice of any Event of
Noncompliance or Potential Event of Noncompliance, an Officer's Certificate
of the Company's chief financial officer or president specifying in
reasonable detail the nature and period of existence thereof and what
actions the Company and its Subsidiaries have taken, are taking and propose
to take with respect thereto;
vii. promptly after the commencement thereof, written notice of
all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign, which involve any substantial risk of any Material Adverse
Effect;
viii. promptly after the entering thereof, written notice of all
adverse judgments in excess of $1.0 million or which involve any
substantial risk of any Material Adverse Effect entered by any court or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, against the Company or any
Subsidiary, which notice shall include the exact dollar amount of any such
adverse judgment as well as any other expected adverse impact on the
Company and its Subsidiaries;
ix. promptly after the occurrence thereof, written notice of
all events, conditions, acts, facts and omissions (except general economic
conditions which are a matter of public knowledge) which have had, or
involve any substantial risk of, (either individually or in the aggregate)
any Material Adverse Effect (including any condition or event which is
reasonably likely to result in any material liability under ERISA and the
regulations promulgated thereunder or under any federal, state or local
statute or regulation relating to public health and safety, worker health
and safety or pollution or protection of the environment);
x. promptly after the sending or filing thereof, copies of
all proxy statements, financial statements, reports and any other general
written communications which the Company sends to its stockholders and
copies of all regular, special or periodic reports and all registration
statements which the Company files, or (to the Company's knowledge) any of
its officers or directors file with respect to the Company, with the
Securities and Exchange Commission or any governmental authority which may
be the successor therefor, or with any national securities exchange; and
xi. with reasonable promptness, such other information and
financial data concerning the Company and its Subsidiaries as any Qualified
Holder may reasonably request.
Notwithstanding the foregoing, the provisions of this paragraph 3A shall cease
to be effective so long as the Company (a) is subject to the periodic reporting
requirements of the Securities Exchange Act and continues to comply with such
requirements and (b) promptly provides to each Qualified Holder all reports and
other materials filed by the Company with the Securities and Exchange Commission
pursuant to the periodic reporting requirements of the Securities Exchange Act;
provided that so long as any Preferred Stock remains outstanding, the Company
- --------
shall continue to deliver to each Qualified
-7-
<PAGE>
Holder the information specified in paragraphs 3A(ii)(b), 3A(iii), 3A(v),
3A(vi), 3A(vii), 3A(viii), 3A(ix), and 3A(xi).
For purposes of this Agreement, all holdings of Preferred Stock and Purchaser
Common Stock by Persons who are Affiliates of each other shall be aggregated for
purposes of meeting any threshold tests under this Agreement.
b. Inspection of Property. The Company shall permit any Qualified
----------------------
Holder or any agents or representatives of any Qualified Holder, upon reasonable
notice and during normal business hours and at such other times as any such
Qualified Holder may reasonably request, to (i) visit and inspect any of the
properties of the Company and its Subsidiaries, (ii) examine the corporate and
financial records of the Company and its Subsidiaries and make copies thereof or
extracts therefrom and (iii) discuss the affairs, finances and accounts of any
such corporations with the directors, officers, key employees and independent
accountants of the Company and its Subsidiaries (and the presentation of an
executed copy of this Agreement (or photocopy thereof) by any Qualified Holder
or any agent or representative thereof to such independent accountants shall
constitute the Company's permission to such independent accountants to
participate in discussions with such Persons, regardless of whether such
Qualified Holder or any such agent or representative is a party to this
Agreement); provided that such Qualified Holder or agent or representative shall
--------
give reasonable notice to the Company prior to any contact with such accountants
and give the Company the opportunity to participate in such discussions.
c. Preferred Stock Restrictive Covenants. Subject to paragraph 4E,
-------------------------------------
so long as any Preferred Stock remains outstanding, the Company shall not,
without the prior written consent of the holders of a majority of the Preferred
Stock then outstanding:
i. directly or indirectly declare or pay, or permit any
Subsidiary to declare or pay, any dividends or make any distributions upon
any of its capital stock or other equity securities, except for (A)
dividends payable on the Preferred Stock pursuant to the Articles of
Incorporation (and the Certificate of Designation filed thereunder with
respect to the Preferred Stock), (B) dividends payable in shares of Common
Stock issued upon the outstanding shares of Common Stock and (C) dividends
payable by any Subsidiary (1) to the Company or to any Wholly Owned
Subsidiary or (2) if such dividends are made on a pro rata basis with
respect to all of such Subsidiary's capital stock or other equity
interests;
ii. directly or indirectly redeem, purchase or otherwise
acquire, or permit any Subsidiary to redeem, purchase or otherwise acquire,
any of the Company's or any Subsidiary's capital stock or other equity
securities (including, without limitation, warrants, options and other
rights to acquire such capital stock or other equity securities), or
directly or indirectly redeem, purchase or make any payments with respect
to any stock appreciation rights, phantom stock plans or similar rights or
plans, in each case except for (A) redemption of the Preferred Stock
pursuant to the terms of the Certificate of Designation, (B) the
consummation of the Merger pursuant to the terms of the Merger Agreement,
(C) redemptions or repurchases of the capital stock or other equity
securities of a Subsidiary (1) that are held by the Company or any Wholly
Owned Subsidiary or (2) by such Subsidiary if such redemptions or
repurchases are made on a pro rata basis with respect to all of such
-8-
<PAGE>
Subsidiary's capital stock or other equity interests, and (D) so long as no
Event of Noncompliance then exists or would be caused thereby, redemptions
or other repurchases of Common Stock from any current holder of Common
Stock (who is a current employee of the Company or its Subsidiaries) or
spouses or other heirs of such employee in the event of death, disability
or a Hardship with respect to such employee (provided that the aggregate
--------
amount of all such redemptions or repurchases from all such employees under
this clause (D) shall not exceed $500,000 in any fiscal year and shall not
exceed $2.0 million in the aggregate);
iii. except for (A) issuances of the Preferred Stock and
Warrants at the Closing as contemplated under this Agreement, (B) issuances
of Preferred Stock as payment-in-kind dividends on the Preferred Stock and
(C) the transactions contemplated by the Subordinated Loan Agreement to
occur at the Closing, authorize, issue or enter into any agreement
providing for the issuance (contingent or otherwise) of, any capital stock
or other equity securities (or any securities convertible into or
exchangeable for any capital stock or other equity securities) which are
senior to or on a parity with the Preferred Stock with respect to the
payment of dividends, redemptions or distributions upon liquidation or
otherwise;
iv. merge or consolidate with, or sell, assign, lease,
transfer or otherwise dispose of (whether in one transaction or in a series
of transactions) all or substantially all of its assets (whether now owned
or hereafter acquired) to, any Person or Persons, or permit any Material
Subsidiary to do so, other than (A) a sale or other disposition of assets
by any Subsidiary to the Company or to any Wholly Owned Subsidiary, (B) a
merger or consolidation of a Subsidiary with or into the Company, in which
the Company is the surviving corporation, (C) a merger or consolidation of
a Subsidiary with or into another Subsidiary, (D) a merger or consolidation
of a Subsidiary with or into another Person as part of an acquisition of
another company or business or (E) as otherwise permitted under the
provisions of the Senior Loan Agreement or of the Subordinated Loan
Agreement as each are in effect on the date hereof without duplication of
that permitted under this paragraph 3C(iv)).
v. liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction (including, without limitation,
any reorganization into a limited liability company, a partnership or any
other non-corporate entity which is treated as a partnership for federal
income tax purposes);
vi. engage, or permit any Material Subsidiary to engage,
directly or indirectly, to any substantial extent in any line or lines of
business activities other than the business of the type conducted by the
Company and its Subsidiaries as of the date of the Closing;
vii. create, or permit any of its Material Subsidiaries
directly or indirectly to create or otherwise cause or suffer to exist or
become effective, any encumbrance or restriction of any kind on (a) the
ability of any Material Subsidiary to (1) pay dividends or make any other
distribution on any of such Material Subsidiary's capital stock or other
equity
-9-
<PAGE>
security owned by the Company or any other Subsidiary of the Company, (2)
subject to subordination provisions, pay any Indebtedness owed to the
Company or any other Subsidiary, (3) make loans or advances to the Company
or any other Subsidiary or (4) transfer any of its property or assets to
the Company or any other Subsidiary, or (b) the Company's right to perform
the provisions of this Agreement, the Shareholders' Agreement, the
Registration Agreement, the Certificate of Designation, the Articles of
Incorporation or the Company's Bylaws (including, without limitation,
provisions relating to the declaration and payment of dividends on and the
making of redemptions of the Preferred Stock), except for (x) such
encumbrances or restrictions existing under or by reason of (A) applicable
law, (B) restrictions under the Senior Loan Agreement and the Subordinated
Loan Agreement, (C) such restrictions with respect to the transfer of those
assets subject to a Permitted Lien, (D) customary provisions restricting or
subletting or assignment of any lease giving a leaseholder interest of the
Company or any of its Subsidiaries, and (E) with respect to restrictions on
transfer of property only, restrictions in any agreement relating to any
sale or other disposition of assets of the Company or any of its
Subsidiaries that is permitted hereunder, and in the case of clause (a)
except for (y) any additional encumbrances or restrictions permitted under
the provisions of the Senior Loan Agreement or of the Subordinated Loan
Agreement as each are in effect on the date hereof (without duplication of
that permitted under this paragraph 3C(vii));
viii. except as expressly contemplated by this Agreement, amend,
supplement, modify, terminate, waive or permit to be amended, supplemented,
modified, terminated or waived, any of the provisions of the Articles of
Incorporation (including the Certificate of Designation or any other
certificate of designation setting forth the terms of any class or series
of preferred stock) or the Company's Bylaws, or file any resolution of the
Company's board of directors with the Texas Secretary of State, in each
case in any manner which could reasonably be expected to be adverse to the
holders of Preferred Stock;
ix. enter into, amend, modify, supplement, terminate or waive,
or permit any Subsidiary to enter into, amend, modify, supplement,
terminate or waive, any agreement, transaction, commitment or arrangement
with any of its or any Subsidiary's officers, directors, senior executives,
principal stockholders (other than the Company or another Subsidiary) or
Affiliates, or with any such individual's spouse, sibling, lineal ancestor
or descendant, or spouse's sibling or lineal ancestor or descendant, or
with any entity in which any of the foregoing owns a beneficial interest,
unless such transaction is otherwise not prohibited under this Agreement,
is in the ordinary course of the Company's or such Subsidiary's business
and is on fair and reasonable terms that are not less favorable to the
Company or such Subsidiary than those that would be obtainable at the time
in an arm's length transaction with a Person not described above; provided
--------
that the following shall in any event be permitted: (1) dividends,
redemptions, stock purchases and other distributions otherwise permitted
under this Agreement, (2) the payment of reasonable fees to directors of
the Company or any Subsidiary who are not employees of the Company or any
of its Subsidiaries, (3) so long as no Event of Noncompliance would arise
therefrom, any transaction with an officer or member of the board of
directors of the Company or any of its Subsidiaries in the ordinary course
of business involving compensation, indemnity, employee benefit
arrangements or expense reimbursement, (4) loans or advances to employees
-10-
<PAGE>
otherwise permitted under this Agreement, (5) transactions and agreements
in existence on the date hereof and described with particularity in the
Affiliated Transactions Schedule attached hereto, (6) customary employment
--------------------------------
arrangements and benefit programs on reasonable terms as approved by the
board of directors of the Company or a committee thereof, (7) so long as no
Event of Noncompliance exists or would be caused thereby, repurchases of
capital stock as provided by the Shareholders' Agreement as in effect on
the date hereof; and (8) so long as no Event of Noncompliance would be
caused thereby, any additional such transaction permitted under the
provisions of the Senior Loan Agreement or of the Subordinated Loan
Agreement as each is in effect on the date hereof (without duplication of
that permitted under this paragraph 3C(ix));
x. create, incur, assume, guarantee or be or remain liable for,
contingently or otherwise, or suffer to exist, or permit any of its
Subsidiaries to create, incur, assume, guarantee or be or remain liable
for, contingently or otherwise, or suffer to exist, any Indebtedness other
than (A) Permitted Indebtedness or (B) any other Indebtedness, so long as
the ratio of (x) Consolidated EBITDA for the most recent Measurement Period
ending on or prior to the date of incurrence of such Indebtedness to (y)
--
Consolidated Fixed Charges for such Measurement Period (after giving pro
forma effect in the calculation of Consolidated EBITDA and Consolidated
Fixed Charges for such Measurement Period to the interest and required
principal payments with respect to such Indebtedness as if such
Indebtedness were incurred on the first day of such Measurement Period)
equals or exceeds 1.25:1.0;
xi. make or permit, or permit any Subsidiary to make or permit,
any change in its respective fiscal year (the Saturday closest to August 31
of each year); or
xii. use the proceeds from the sale of the Preferred Stock other
than to pay the Merger consideration and related fees and expenses as
contemplated by the Merger Agreement or for working capital and budgeted
general corporate purposes.
d. Preferred Stock Affirmative Covenants. So long as any Preferred
-------------------------------------
Stock remains outstanding, the Company shall, and shall cause each Subsidiary
to, unless it has received the prior written consent of the holders of a
majority of the Preferred Stock then outstanding:
i. preserve and maintain its corporate existence, all of its
material rights, franchises and privileges in the jurisdiction of its
incorporation, and all material licenses, authorizations, orders, permits
and other governmental approvals necessary to the conduct of its
businesses, and qualify and remain qualified as a foreign corporation in
each jurisdiction in which failure to qualify would (either individually or
in the aggregate) have a Material Adverse Effect; provided, however, that
-------- -------
nothing in this paragraph (i) shall prohibit any transaction expressly
permitted under paragraph 3C(iv);
ii. maintain and preserve all of its properties used or usable
in its businesses in good repair, working order and condition (ordinary
wear and tear excepted), except to the extent that failure to do so with
respect to any such property would not (either individually or in the
aggregate) have a Material Adverse Effect;
-11-
<PAGE>
iii. pay and discharge when payable all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or
profits or upon any properties belonging to it (in each case prior to the
date on which penalties accrue thereon), and all lawful claims which, if
unpaid, would become a Lien upon any of the properties of the Company or
its Subsidiaries, unless and to the extent that (A) the failure to so pay
or discharge would not (either individually or in the aggregate) have a
Material Adverse Effect or (B) the same are being contested in good faith
and by appropriate proceedings and adequate reserves or other provisions
(as determined in accordance with generally accepted accounting principles,
consistently applied) have been made and recorded on the Company's
financial records with respect thereto;
iv. comply with all other obligations that it incurs pursuant to
any contract or agreement, whether oral or written, express or implied, as
such obligations become due, unless and to the extent that (A) the failure
to so comply would not (either individually or in the aggregate) have a
Material Adverse Effect or (B) the same are being contested in good faith
and by appropriate proceedings and adequate reserves or other provisions
(as determined in accordance with generally accepted accounting principles,
consistently applied) have been made and recorded on the Company's
financial records with respect thereto;
v. comply with the applicable requirements of all laws, rules,
regulations and orders of all governmental authorities (including, but not
limited to, ERISA and the rules, regulations and orders promulgated
thereunder), the violation of which would (either individually or in the
aggregate) have a Material Adverse Effect;
vi. maintain insurance on its properties and businesses with
financially sound and reputable insurance companies in such amounts, of
such types and covering such casualties, risks and contingencies as is
ordinarily carried by companies engaged in similar businesses and owning
similar properties in the same general locations in which the Company and
its Subsidiaries operate; and
vii. keep proper records and books of account which present
fairly in all material respects the financial condition, results of
operations and financial transactions of the Company and its Subsidiaries,
and make provisions on its financial statements for all such proper
reserves as in each case are required in accordance with generally accepted
accounting principles, consistently applied.
e. Purchaser Common Stock Restrictive Covenants. So long as at least
--------------------------------------------
300,000 shares of Purchaser Common Stock (as such number of shares is equitably
adjusted for stock splits, stock dividends, recapitalizations and
reorganizations affecting the Common Stock) exist, the Company shall not,
without the prior written consent of the holders of a majority of the Purchaser
Common Stock:
i. directly or indirectly redeem, purchase or otherwise
acquire, or permit any Subsidiary to redeem, purchase or otherwise acquire,
any of the Company's or any Subsidiary's capital stock or other equity
securities (including, without limitation, warrants,
-12-
<PAGE>
options and other rights to acquire such capital stock or other equity
securities), or directly or indirectly redeem, purchase or make any
payments with respect to any stock appreciation rights, phantom stock plans
or similar rights or plans, in each case except for (A) redemption of the
Preferred Stock pursuant to the terms of the Certificate of Designation,
(B) the consummation of the Merger pursuant to the terms of the Merger
Agreement, (C) redemptions or repurchases of the capital stock or other
equity securities of a Subsidiary (1) that are held by the Company or any
Wholly Owned Subsidiary or (2) by such Subsidiary if such redemptions or
repurchases are made on a pro rata basis with respect to all of such
Subsidiary's capital stock or other equity interests, (D) repurchases of
Common Stock from employees of the Company and its Subsidiaries upon
termination of employment pursuant to arrangements approved by the
Company's board of directors, (E) pursuant to repurchase options that are
offered pro rata to the holders of Common Stock (including the holders of
Purchaser Common Stock) or (F) redemptions or other repurchases of Common
Stock from any current holder of Common Stock (who is a current employee of
the Company or its Subsidiaries) or spouses or other heirs of such employee
in the event of death, disability or a Hardship with respect to such
employee (provided that the aggregate amount of all such repurchases and
--------
redemptions to all such employees under this clause (F) shall not exceed
$500,000 in any fiscal year and shall not exceed $2.0 million in the
aggregate);
ii. effect any reorganization into a limited liability company
or into partnership or any other non-corporate entity which is treated as a
partnership for federal income tax purposes; or
iii. enter into, amend, modify, supplement, terminate or waive,
or permit any Subsidiary to enter into, amend, modify, supplement,
terminate or waive, any agreement, transaction, commitment or arrangement
with any of its or any Subsidiary's officers, directors, senior executives,
principal stockholders (other than the Company or another Subsidiary) or
Affiliates, or with any such individual's spouse, sibling, lineal ancestor
or descendant, or spouse's sibling or lineal ancestor or descendant, or
with any entity in which any of the foregoing owns a beneficial interest,
unless such transaction is otherwise not prohibited under this Agreement,
is in the ordinary course of the Company's or such Subsidiary's business
and is on fair and reasonable terms that are not less favorable to the
Company or such Subsidiary than those that would be obtainable at the time
in an arm's length transaction with a Person not described above; provided
--------
that the following shall in any event be permitted: (1) dividends,
redemptions, stock purchases and other distributions otherwise permitted
under this Agreement, (2) the payment of reasonable fees to directors of
the Company or any Subsidiary who are not employees of the Company or any
of its Subsidiaries, (3) any transaction with an officer or member of the
board of directors of the Company or any of its Subsidiaries in the
ordinary course of business involving compensation, indemnity, employee
benefit arrangements or expense reimbursement, (4) loans or advances to
employees otherwise permitted under this Agreement, (5) transactions and
agreements in existence on the date hereof and described with particularity
in the Affiliated Transactions Schedule attached hereto, (6) customary
employment arrangements and benefit programs on reasonable terms as
approved by the board of directors of the Company or a committee thereof,
(7) repurchases of capital stock as provided by the Shareholders' Agreement
as in effect on the date hereof; and (8) any additional such
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<PAGE>
transactions permitted under the provisions of the Senior Loan Agreement or
of the Subordinated Loan Agreement as each is in effect on the date hereof
(without duplication of that permitted under this paragraph 3E(iii));
f. Compliance with Agreements. The Company shall perform and
--------------------------
observe (i) all of its obligations to each holder of the Preferred Stock and all
of its obligations to each holder of the Purchaser Common Stock set forth in the
Articles of Incorporation, the Certificate of Designation and the Company's
Bylaws, (ii) all of its obligations to each holder of the Warrants as set forth
therein and (iii) all of its obligations to each holder of "Registrable
Securities" set forth in the Registration Agreement (as such term is defined
therein).
g. Current Public Information. At all times after the Company
--------------------------
has filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company shall file all reports required to be filed by it
under the Securities Act and the Securities Exchange Act and the rules and
regulations adopted by the Securities and Exchange Commission thereunder and
shall take such further action as any holder or holders of Restricted Securities
may reasonably request, all to the extent required to enable such holders to
sell Restricted Securities pursuant to (i) Rule 144 adopted by the Securities
and Exchange Commission under the Securities Act (as such rule may be amended
from time to time) or any similar rule or regulation hereafter adopted by the
Securities and Exchange Commission or (ii) a registration statement on Form S-2
or S-3 or any similar registration form hereafter adopted by the Securities and
Exchange Commission. Upon request, the Company shall deliver to any holder of
Restricted Securities a written statement as to whether it has complied with
such requirements.
h. Limited Rights of First Refusal.
-------------------------------
i. If the Company authorizes the issuance or sale of any shares
of Common Stock (or any securities containing options or rights to acquire any
shares of Common Stock), other than an Exempt Issuance (as defined below), the
Company shall first offer to sell to each holder of Purchaser Common Stock a
portion of such stock or securities equal to the quotient determined by dividing
(1) the number of shares of Purchaser Common Stock held by such holder by (2)
the sum of the total number of shares of Purchaser Common Stock then in
existence and the total number of shares of Common Stock (other than Purchaser
Common Stock) then outstanding. Each holder of Purchaser Common Stock shall be
entitled to purchase such stock or securities at the most favorable price and on
the most favorable terms as such stock or securities are to be offered to any
other Persons; provided that if all Persons entitled to purchase or receive such
--------
stock or securities are required to also purchase other securities of the
Company, the holders of Purchaser Common Stock exercising their rights pursuant
to this Section shall also be required to purchase the same strip of securities
(on the same terms and conditions) that such other Persons are required to
purchase. The purchase price for all stock and securities offered to the holders
of Purchaser Common Stock shall be payable in cash or, to the extent otherwise
required hereunder, notes issued by such holders.
ii. In order to exercise its purchase rights hereunder, a holder
of Purchaser Common Stock must within 15 days after receipt of written notice
from the Company describing in reasonable detail the stock or securities being
offered, the purchase price thereof, the payment terms
-14-
<PAGE>
and such holder's percentage allotment deliver a written notice to the Company
describing its election hereunder. If all of the stock and securities offered to
the holders of Purchaser Common Stock is not fully subscribed by such holders,
the remaining stock and securities shall be reoffered by the Company to the
holders purchasing their full allotment upon the terms set forth in this Section
(except that such holders must exercise their purchase rights within 5 days
after receipt of such reoffer), and so on until either (x) all the stock and
securities offered to the holders of Purchaser Common Stock has been fully
subscribed or (y) no holder of Purchaser Common Stock has elected to purchase
any additional offered stock or securities.
iii. Upon the expiration of the offering periods described above,
the Company shall be entitled to sell such stock or securities which the holders
of Purchaser Common Stock have not elected to purchase during the 90 days
following such expiration on terms and conditions no more favorable to the
purchasers thereof than those offered to such holders. Any stock or securities
offered or sold by the Company after such 90-day period must be reoffered to the
holders of Purchaser Common Stock pursuant to the terms of this Section.
iv. The rights of the holders of Purchaser Common Stock under
this paragraph 3H shall terminate upon the Company's sale in an underwritten
public offering registered on Form S-1 (or a successor form) filed with the
Securities and Exchange Commission of Common Stock having an aggregate selling
price (net of underwriting discounts and commissions) of at least $30.0 million.
v. For purposes of this Agreement, "Exempt Issuance" shall mean
---------------
any issuance (a) of Common Stock and Warrants at the Closing as contemplated
under this Agreement, (b) of Common Stock upon exercise of the Warrants, (c) of
securities to the Company's employees pursuant to stock option or stock
ownership plans approved by the Company's board of directors, (d) of securities
as consideration in connection with the acquisition of another company or
business, (e) of securities as a pro rata dividend with respect to the Company's
Common Stock, (f) of warrants or other securities issued to a lender in
connection with its loan to the Company or any of its Subsidiaries, (g) of
securities pursuant to a public offering registered with the Securities and
Exchange Commission under the Securities Act, or (h) of shares of Common Stock
(so long as the number of such shares of Common Stock, together with the
aggregate number of shares of Common Stock issued pursuant to this clause (h) in
all other Exempt Issuances, does not exceed 100,000 shares of Common Stock in
the aggregate (in each case, as such number is adjusted for any stock splits,
stock dividends, stock combinations or similar transactions occurring after the
date hereof affecting the Common Stock)).
i. Public Disclosures. The Company shall not, nor shall it
------------------
permit any Subsidiary to, disclose any Purchaser's name or identity as an
investor in the Company in any press release or other public announcement or in
any document or material filed with any governmental entity, without the prior
written consent of such Purchaser, unless such disclosure is required by
applicable law or governmental regulations or by order of a court of competent
jurisdiction, in which case prior to making such disclosure the Company shall
give written notice to such Purchaser describing in reasonable detail the
proposed content of such disclosure and shall permit the Purchaser to review and
comment upon the form and substance of such disclosure.
-15-
<PAGE>
SECTION 4. TRANSFER OF RESTRICTED SECURITIES.
---------------------------------
a. General Provisions. 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 paragraph 4B below, any other legally available means of
transfer.
b. Opinion Delivery. In connection with the transfer of any
----------------
Restricted Securities (other than a transfer described in paragraph 4A(i) or
(ii) 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 Kirkland & Ellis or other 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, in connection with a transfer described in paragraph 4A(i) or (ii)
above or if the holder of the Restricted Securities delivers to the Company an
opinion of Kirkland & Ellis or such other 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 for such Restricted Securities which do not bear the Securities Act
legend set forth in paragraph 7C. If the Company is not required to deliver new
certificates 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 conditions
contained in this Section and paragraph 7C (and, to the extent applicable, in
the Shareholders' Agreement).
c. Rule 144A. Upon the request of any Purchaser, the Company shall
---------
promptly supply to such Purchaser or its prospective transferees all information
regarding the Company required to be delivered in connection with a transfer
pursuant to Rule 144A of the Securities and Exchange Commission.
d. Legend Removal. 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 paragraph 7C from
the certificates for such Restricted Securities.
e. Two-Year Restriction; Effect of Transfer on Certain Covenants.
-------------------------------------------------------------
Prior to the second anniversary of the Closing Date, SBAF shall not sell, assign
or otherwise transfer any portion of the Preferred Stock to any other Person
(other than an Affiliate of a Purchaser) without the Company's prior consent,
which consent will not be unreasonably withheld or delayed. If at any time after
the date hereof, (i) all obligations under the Subordinated Loan Agreement have
been paid in full in cash and all obligations to extend credit thereunder have
been terminated, and (ii) the Purchasers (together with their respective
Affiliates) no longer hold in the aggregate a majority of the Preferred Stock
then outstanding, the covenants set forth in paragraphs 3C(iv), 3C(vi), 3C(x)
and 3C(xii) hereof shall automatically terminate and be of no further force and
effect, and the Company shall thereafter have no obligation hereunder to comply
with any such covenant, and non-compliance with such covenants shall thereafter
cease to be a violation of this Agreement or an Event of Noncompliance under the
Certificate of Designation (and any existing Event of Noncompliance
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<PAGE>
under the Certificate of Designation as a result of a default under such
covenants shall automatically be deemed permanently cured and waived).
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As a
---------------------------------------------
material inducement to the Purchasers to enter into this Agreement and purchase
the Stock and Warrants hereunder, the Company hereby represents and warrants
that:
a. Organization, Corporate Power and Licenses. The Company and each
------------------------------------------
of its Subsidiaries is a corporation or other entity duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and is duly qualified to do business as a foreign corporation in every
jurisdiction in which the failure to qualify has had or would reasonably be
expected to have a Material Adverse Effect. The Company and each of its
Subsidiaries possesses all requisite corporate power and authority and all
material licenses, permits and authorizations necessary to own and operate its
properties, to carry on its businesses as now being conducted and as presently
proposed to be conducted and to carry out the transactions contemplated by this
Agreement. The Company has provided the Purchasers with true, correct and
complete copies of the articles or certificate of incorporation and bylaws of
the Company and each of its Subsidiaries, which reflect all amendments made
thereto at any time prior to the date of this Agreement.
b. Capital Stock and Related Matters.
---------------------------------
(i) As of the Closing and immediately thereafter, the authorized
capital stock of the Company shall consist of: (a) 1,000,000 shares of preferred
stock, of which 20,000 shares shall be designated as Preferred Stock (all of
which shall be issued and outstanding) and no other such shares shall be
outstanding, and (b) 20,000,000 shares of Common Stock, of which 1,290,012
shares shall be issued and outstanding, 565,966 shares shall be reserved for
issuance upon exercise of the Series A Warrants, 424,474 shares shall be
reserved for issuance upon exercise of the Series B Warrants and 549,377 shares
shall be reserved for issuance upon exercise of other outstanding options and
warrants to acquire the Company's Common Stock (as described below). As of the
Closing, neither the Company nor any Subsidiary shall have outstanding any stock
or securities convertible or exchangeable for any shares of its capital stock or
containing any profit participation features, nor shall it have outstanding any
rights or options to subscribe for or to purchase its capital stock or any stock
or securities convertible into or exchangeable for its capital stock or any
stock appreciation rights or phantom stock plans or similar rights or plans,
except for the Warrants and except as set forth on the attached "Capitalization
--------------
Schedule." The Capitalization Schedule accurately sets forth the following
- -------- -----------------------
information with respect to all outstanding options and rights to acquire the
Company's capital stock: the holder, the number of shares covered, the exercise
price and the expiration date. As of the Closing, neither the Company nor any
Subsidiary shall be subject to any obligation (contingent or otherwise) 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, except as set
forth on the Capitalization Schedule and except pursuant to the Certificate of
-----------------------
Designation. As of the Closing, all of the outstanding shares of the Company's
capital stock shall be validly issued, fully paid and nonassessable.
ii. There are no statutory or, to the best of the Company's
knowledge, contractual stockholders preemptive rights or rights of refusal with
respect to the issuance of the Stock or the
-17-
<PAGE>
Warrants hereunder or the issuance of the Common Stock upon exercise of the
Warrants. The Company has not violated any applicable federal or state
securities laws in connection with the offer, sale or issuance of any of its
capital stock, and the offer, sale and issuance of the Stock and Warrants
hereunder do not require registration under the Securities Act or any applicable
state securities laws. To the best of the Company's knowledge, there are no
agreements between the Company's stockholders with respect to the voting or
transfer of the Company's capital stock or with respect to any other aspect of
the Company's affairs, except for the Shareholders' Agreement.
c. Subsidiaries; Investments. The attached "Subsidiary Schedule"
------------------------- -------------------
correctly sets forth the name of each Subsidiary, the jurisdiction of its
incorporation and the Persons owning the outstanding capital stock of such
Subsidiary. All of the outstanding shares of capital stock of each Subsidiary
are validly issued, fully paid and nonassessable, and all such shares are owned
by the Company or another Subsidiary free and clear of any Lien (except pursuant
to the Senior Loan Agreement) and not subject to any option or right to purchase
any such shares. Except as set forth on the Subsidiary Schedule, neither the
-------------------
Company nor any Subsidiary owns or holds the right to acquire any shares of
stock or any other security or interest in any other Person.
d. Authorization; Noncontravention. The execution, delivery and
-------------------------------
performance of this Agreement, the Warrants, the Shareholders' Agreement, the
Registration Agreement, the Merger Agreement, the Senior Loan Agreement, the
Subordinated Loan Agreement and all other agreements contemplated hereby or
thereby to which the Company is a party, the filing of the Certificate of
Designation and the amendment of the Company's Bylaws have been duly authorized
by all necessary corporate action on the part of the Company and each of its
Subsidiaries. This Agreement, the Warrants, the Shareholders' Agreement, the
Registration Agreement, the Merger Agreement, the Senior Loan Agreement, the
Subordinated Loan Agreement, the Articles of Incorporation, the Certificate of
Designation and all other agreements contemplated hereby or thereby to which the
Company is a party each constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, similar laws affecting
creditors' rights generally or general principles of equity. Except as set
forth on the attached "Restrictions Schedule," the execution and delivery by the
---------------------
Company of this Agreement, the Warrants, the Shareholders' Agreement, the
Registration Agreement, the Merger Agreement, the Senior Loan Agreement, the
Subordinated Loan Agreement and all other agreements contemplated hereby or
thereby to which the Company is a party, the offering, sale and issuance of the
Stock and the Warrants hereunder, the issuance of the Common Stock upon exercise
of the Warrants, the filing of the Certificate of Designation, the amendment of
the Company's Bylaws and the fulfillment of and compliance with the respective
terms hereof and thereof by the Company, do not and shall not (i) conflict with
or result in a breach of any of the terms, conditions or provisions of, (ii)
constitute a default under, (iii) result in the creation of any Lien upon the
Company's or any Subsidiary's capital stock or assets pursuant to, (iv) give any
third party the right to modify, terminate or accelerate any obligation under,
(v) result in a violation of or (vi) require any authorization, consent,
approval, exemption or other action by or notice or declaration to, or filing
with, any court or administrative or governmental body or agency pursuant to,
the Certificate of Designation or the charter or bylaws of the Company or any
Subsidiary, or any law, statute, rule, regulation, order, writ, injunction or
decree of any court or administrative or governmental body or agency to which
the Company or any of its Subsidiaries is subject, or any material agreement or
instrument to which the Company or any of its Subsidiaries
-18-
<PAGE>
is a party or by which any of them or any of their properties is bound, except
(A) as contemplated by and pursuant to the Senior Loan Agreement and the
Subordinated Loan Agreement, (B) which would not (either individually or in the
aggregate) have a Material Adverse Effect or (C) as set forth on the attached
"Restrictions Schedule," all of which items listed on the Restrictions Schedule
--------------------- ---------------------
shall be duly waived or amended prior to the Closing hereunder so as to
eliminate any such conflict, breach, violation, default or Lien.
e. Financial Statements. The Company has furnished the Purchasers
--------------------
with true, correct and complete copies of each of the following financial
statements:
i. the audited consolidated balance sheets of the Company and
its Subsidiaries as of August 30, 1997, and August 31, 1996, and the
related statements of income and cash flows (or the equivalent) for the
respective 52-or 53-week fiscal periods then ended; and
ii. the unaudited consolidated balance sheet of the Company and
its Subsidiaries as of May 30, 1998 (the "Latest Balance Sheet"), and the
related statements of income and cash flows (or the equivalent) for the
nine--month period then ended.
Each of the foregoing financial statements (including in all cases the notes
thereto, if any) is accurate and complete in all material respects, is
consistent with the books and records of the Company (which, in turn, are
accurate and complete in all material respects) and has been prepared in
accordance with generally accepted accounting principles, consistently applied,
subject in the case of the unaudited financial statements to the absence of
footnote disclosure and changes resulting from normal year-end adjustments for
recurring accruals (none of which, alone or in the aggregate, would have a
Material Adverse Effect).
f. Absence of Undisclosed Liabilities. Except as set forth on the
----------------------------------
attached "Liabilities Schedule," the Company and its Subsidiaries do not have
--------------------
any obligation or liability (whether accrued, absolute, contingent, unliquidated
or otherwise, whether or not known to the Company or any Subsidiary, whether due
or to become due and regardless of when asserted) arising out of transactions
entered into at or prior to the Closing, or any action or inaction at or prior
to the Closing, or any state of facts existing at or prior to the Closing other
than: (i) liabilities set forth on the liabilities side of the Latest Balance
Sheet, (ii) liabilities and obligations which have arisen after the date of the
Latest Balance Sheet in the ordinary course of business (none of which is a
liability resulting from breach of contract, breach of warranty, product
liability, tort, infringement, claim or lawsuit or an environmental liability),
(iii) liabilities and obligations that would not have (either individually or in
the aggregate) a Material Adverse Effect or (iv) other liabilities and
obligations expressly disclosed in the other Schedules to this Agreement.
g. No Material Adverse Change. Since August 30, 1997, there has
--------------------------
been no Material Adverse Effect, or any event, change or circumstance that could
reasonably be expected to result (either individually or in the aggregate) in a
Material Adverse Effect.
-19-
<PAGE>
h. Absence of Certain Developments.
-------------------------------
(i) Except as expressly contemplated by this Agreement or the Merger
Agreement or as set forth on the attached "Developments Schedule," since the
---------------------
date of the Latest Balance Sheet, neither the Company nor any Subsidiary have
(1) suffered, or taken any action or affirmatively failed to
take any action which action or failure could reasonably be expected to
result (either individually or in the aggregate) in, a Material Adverse
Effect;
(2) issued any notes, bonds or other debt securities or any
capital stock or other equity securities or any securities convertible,
exchangeable or exercisable into any capital stock or other equity
securities (other than upon the exercise of outstanding employee options in
the ordinary course of business);
(3) borrowed any amount or incurred or become subject to any
liabilities, except current liabilities incurred in the ordinary course of
business, liabilities under contracts entered into in the ordinary course
of business, and other Permitted Indebtedness;
(4) discharged or satisfied any material Lien or paid any
material obligation or liability, other than current liabilities paid in
the ordinary course of business;
(5) declared, set aside or made any payment or distribution of
cash or other property to its stockholders with respect to its capital
stock or other equity securities or purchased or redeemed any shares of its
capital stock or other equity securities (including, without limitation,
any warrants, options or other rights to acquire its capital stock or other
equity securities), or directly or indirectly redeemed, purchased or made
any payments with respect to any stock appreciation rights, phantom stock
plans or similar rights or plans;
(6) mortgaged or pledged any of its material properties or
assets or subjected them to any Lien, except Permitted Liens;
(7) sold, leased, assigned or transferred any material portion
of its tangible assets or Intellectual Property Rights, except in the
ordinary course of business, or canceled without fair consideration any
debts or claims owing to or held by it, or disclosed any confidential
information other than pursuant to agreements preserving all rights of the
Company in such confidential information, or received any confidential
information of any third party in violation of any obligation or
confidentiality;
(8) suffered any material extraordinary losses or waived any
rights of material value, whether or not in the ordinary course of business
or consistent with past practice; or
(9) entered into, amended or terminated any material lease,
contract, agreement, commitment or any other material transaction, whether
or not in the ordinary course of business, or materially changed any
business practice.
-20-
<PAGE>
ii. Neither the Company nor any Subsidiary has at any time made any
payments for political contributions or made or received any bribes, kickback
payments or other illegal payments.
i. Assets. Except as set forth on the attached "Assets Schedule" or
------ ---------------
except as would not (either individually or in the aggregate) have a Material
Adverse Effect: the Company and each Subsidiary have good and marketable title
to, or a valid leasehold interest in, the properties and assets used by them,
located on their premises or shown on the Latest Balance Sheet or acquired
thereafter, free and clear of all Liens, except for properties and assets
disposed of in the ordinary course of business since the date of the Latest
Balance Sheet and except for Permitted Liens; the Company's and each
Subsidiary's buildings, equipment and other tangible assets are in good
operating condition, ordinary wear and tear excepted, and are reasonably fit for
use in the ordinary course of business; and the Company and each Subsidiary own,
or have a valid leasehold interest in, all assets necessary for the conduct of
their respective businesses as presently conducted and as presently proposed to
be conducted.
j. Tax Matters.
-----------
i. Except as set forth on the attached "Taxes Schedule" or except as
--------------
would not (either individually or in the aggregate) have a Material Adverse
Effect: the Company and each Subsidiary have filed all Tax Returns which they
are required to file under applicable laws and regulations; all such Tax Returns
are complete and correct and have been prepared in compliance with all
applicable laws and regulations; the Company and each Subsidiary have paid all
Taxes due and owing by them (whether or not such Taxes are required to be shown
on a Tax Return) and have withheld and paid over to the appropriate taxing
authority all Taxes which they are required to withhold from amounts paid or
owing to any employee, stockholder, creditor or other third party; neither the
Company nor any Subsidiary has waived any statute of limitations with respect to
any Taxes or agreed to any extension of time with respect to any Tax assessment
or deficiency; the accrual for Taxes on the Latest Balance Sheet would be
adequate to pay all Tax liabilities of the Company and its Subsidiaries if their
current tax year were treated as ending on the date of the Latest Balance Sheet
(excluding any amount recorded which is attributable solely to timing
differences between book and Tax income); since the date of the Latest Balance
Sheet, the Company and its Subsidiaries have not incurred any liability for
Taxes other than in the ordinary course of business; the assessment of any
additional Taxes for periods for which Tax Returns have been filed by the
Company and each Subsidiary shall not exceed the recorded liability therefor on
the Latest Balance Sheet (excluding any amount recorded which is attributable
solely to timing differences between book and Tax income); to the Company's
knowledge, no foreign, federal, state or local tax audits or administrative or
judicial proceedings are pending or being conducted with respect to the Company
or any Subsidiary, no information related to Tax matters has been requested by
any foreign, federal, state or local taxing authority and no written notice
indicating an intent to open an audit or other review has been received by the
Company from any foreign, federal, state or local taxing authority; and there
are no material unresolved questions or claims concerning the Company's or any
Subsidiary's Tax liability.
ii. Neither the Company nor any of its Subsidiaries has made an
election under (S)341(f) of the IRC. Neither the Company nor any Subsidiary is
liable for the Taxes of another
-21-
<PAGE>
Person that is not a Subsidiary (a) under Treas. Reg. (S) 1.1502-6 (or
comparable provisions of state, local or foreign law), (b) as a transferee or
successor, (c) by contract or indemnity or (d) otherwise, except as would not
(either individually or in the aggregate) have a Material Adverse Effect.
Neither the Company nor any Subsidiary is a party to any tax sharing agreement.
The Company and each Subsidiary have disclosed on their federal income Tax
Returns any position taken for which substantial authority (within the meaning
of IRC (S)6662(d)(2)(B)(i)) did not exist at the time the return was filed.
Neither the Company nor any Subsidiary has made any payments, is obligated to
make payments or is a party to an agreement that could obligate it to make any
payments that would not be deductible under IRC (S)280G.
iii. "Tax" or "Taxes" means federal, state, county, local, foreign or
--- -----
other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax and interest attributable
thereto) whether disputed or not. "Tax Returns" means any returns, declarations,
-----------
reports, claims for refund, information returns or other documents (including
any related or supporting schedules, statements or information and including any
amendment thereof) filed or required to be filed in connection with the
determination, assessment or collection of Taxes of any party or the
administration of any laws, regulations or administrative requirements relating
to any Taxes. "Affiliated Group" means any affiliated group as defined in IRC
----------------
(S)1504 that has filed a consolidated return for federal income tax purposes (or
any similar group under state, local or foreign law) for a period during which
any of the Company or any of its Subsidiaries was a member.
k. Contracts and Commitments.
-------------------------
i. All of the contracts of the Company and its Subsidiaries that are
required to be described in the documents described under paragraph 5V hereof
(the "SEC Documents") or to be filed as exhibits thereto are described in the
-------------
SEC Documents or filed as exhibits thereto, and (except as set forth on the
attached "Contracts Schedule") all such contracts required to be filed as
------------------
exhibits thereto are valid, binding and enforceable in accordance with their
respective terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, similar laws affecting creditors' rights generally
or general principles of equity. True and complete copies of all such contracts
have been made available to Purchaser. Neither the Company nor any of its
Subsidiaries is in breach of or in default under any such contract, nor, to the
knowledge of the Company, is any other party in material breach of or in default
under any such contract.
ii. Except as expressly contemplated by this Agreement or as set
forth on the attached "Contracts Schedule" or the attached "Employee Benefits
------------------ -----------------
Schedule," neither the Company nor any Subsidiary is a party to or bound by, nor
- --------
are any assets, properties or operations of the Company or any of its
Subsidiaries bound by, any written or oral:
(1) employment, non-competition, consulting or severance
agreement;
(2) lease of real property;
-22-
<PAGE>
(3) lease of personal property with an annual base rental
obligation of more than $100,000 or a total remaining rental obligation of
more than $250,000;
(4) joint venture or partnership agreement;
(5) agreement with a term of more than six months which is not
terminable by the Company or any Subsidiary upon less than 30 days' notice
without penalty or damages, and which involves an obligation of the Company
of more than $100,000;
(6) agreement containing covenants limiting the ability of the
Company or any of its Subsidiaries to compete in any line of business with
any Person in any area or territory;
(7) contract involving any commitment of suretyship, guaranty or
indemnification by the Company;
(8) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit plan or
arrangement, or any collective bargaining agreement or any other contract
with any labor union, or severance agreements, programs, policies or
arrange ments;
(9) contract under which the Company or Subsidiary has advanced
or loaned, or made any Investment in, any other Person (other than a Wholly
Owned Subsidiary) of amounts in the aggregate exceeding;
(10) agreement under which it has granted any Person any
registration rights (including, without limitation, demand and piggyback
registration rights); or
(11) agreement related to hazardous waste disposal, solid waste
disposal, wastewater management, investigation of environmental matters,
environmental remediation, employment of environmental consultants, or any
other environmental obligation, liability or agreement.
iii. Except as would not (either individually or in the aggregate)
have a Material Adverse Effect: all of the contracts, agreements and
instruments set forth on the Contracts Schedule are valid, binding and
------------------
enforceable in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization, similar
laws affecting creditors' rights generally or general principles of equity; the
Company and each Subsidiary have performed all obligations required to be
performed by them under the contracts, agreements and instruments required to be
listed on the Contracts Schedule and are not in default under or in breach of
------------------
nor in receipt of any claim of default or breach under any contract, agreement
or instrument required to be listed on the Contracts Schedule; no event has
------------------
occurred which with the passage of time or the giving of notice or both would
result in a default, breach or event of noncompliance by the Company or any
Subsidiary under any contract, agreement or instrument required to be listed on
the Contracts Schedule; neither the Company nor any Subsidiary has any present
------------------
expectation or intention of not fully performing all such obligations; neither
the Company nor any Subsidiary has
-23-
<PAGE>
knowledge of any breach or anticipated breach by the other parties to any
contract, agreement, instrument or commitment required to be listed on the
Contracts Schedule; and neither the Company nor any Subsidiary is a party to any
- ------------------
contract requiring it to purchase or sell goods or services or lease property
above or below (as the case may be) prevailing market prices and rates.
iv. The Purchasers' special counsel has been given the opportunity to
review a true and correct copy of each of the written instruments, plans,
contracts and agreements and an accurate description of each of the oral
arrangements, contracts and agreements which are referred to on the Contracts
---------
Schedule, together with all amendments, waivers or other changes thereto.
- --------
l. Intellectual Property Rights.
----------------------------
i. Except as set forth on the attached "Intellectual Property
---------------------
Schedule," the Company or one of its Subsidiaries owns all right, title and
- --------
interest to, or has the right to use pursuant to a valid license, all
Intellectual Property Rights necessary for the operation of the businesses of
the Company and its Subsidiaries as presently conducted and as presently
proposed to be conducted, free and clear of all Liens except for Permitted Liens
(except for those the failure to own or use would not (either individually or in
the aggregate) a Material Adverse Effect). Except as set forth on the
Intellectual Property Schedule, there has not occurred, and to the Company's
- ------------------------------
knowledge there is not threatened, pending or reasonably foreseeable, any loss
or expiration of any Intellectual Property Right or related group of
Intellectual Property Rights owned or used by the Company or any Subsidiary that
would have (either individually or in the aggregate) a Material Adverse Effect.
ii. Except as set forth on the Intellectual Property Schedule or as
------------------------------
would not have (either individually or in the aggregate) a Material Adverse
Effect, (a) there have been no claims made against the Company or any Subsidiary
asserting the invalidity, misuse or unenforceability of any of such Intellectual
Property Rights, and, to the best of the Company's knowledge, there are no valid
grounds for the same, (b) neither the Company nor any Subsidiary has received
any notices of, and is not aware of any facts which indicate a likelihood of,
any infringement or misappropriation by, or conflict with, any third party with
respect to such Intellectual Property Rights (including, without limitation, any
demand or request that the Company or any Subsidiary license any rights from a
third party), (c) the conduct of the Company's and each Subsidiary's business
has not infringed, misappropriated or conflicted with and does not infringe,
misappropriate or conflict with any Intellectual Property Rights of other
Persons, nor would any future conduct as presently contemplated infringe,
misappropriate or conflict with any Intellectual Property Rights of other
Persons and (d) to the best of the Company's knowledge, the Intellectual
Property Rights owned by or licensed to the Company or any Subsidiary have not
been infringed, misappropriated or conflicted by other Persons.
iii. The Company and each of its Subsidiaries has reviewed its
operations with a view to assessing whether its business and operations will,
and none of the Company or any of its Subsidiaries is aware that any of its key
suppliers, vendors or customers will, in the receipt, transmissions, processing,
manipulation, storage, retrieval, re-transmission or other utilization of data,
be vulnerable to any significant risk that computer hardware, software or any
equipment containing embedded microchips used in their business or operations
will not in the case of dates or
-24-
<PAGE>
time periods occurring after December 31, 1999 function at least as effectively
as in the case of dates or time periods occurring prior to January 1, 2000.
Except as set forth on the Intellectual Property Schedule, none of the Company
------------------------------
or any of its Subsidiaries has reason to believe that the risks associated with
this "year 2000" issue could have a Material Adverse Effect. For purposes of
this paragraph (iii), "key suppliers, vendors or customers" refers to those
suppliers, vendors and customers of the Company and its Subsidiaries, whose
business failure could reasonably be expected to have a Material Adverse Effect.
m. Litigation, etc. Except as set forth on the attached "Litigation
--------------- ----------
Schedule": there are no actions, suits, proceedings, orders, investigations or
- --------
claims pending or, to the best of the Company's knowledge, threatened against or
affecting the Company or any Subsidiary (or to the best of the Company's
knowledge, pending or threatened against or affecting any of the officers,
directors or employees of the Company and its Subsidiaries with respect to their
businesses or proposed business activities), or pending or threatened by the
Company or any Subsidiary against any third party, at law or in equity, or
before or by any governmental department, commission, board, bureau, agency or
instrumentality (including, without limitation, any actions, suit, proceedings
or investigations with respect to the transactions contemplated by this
Agreement) that would (either individually or in the aggregate) reasonably be
expected to have a Material Adverse Effect; neither the Company nor any
Subsidiary is subject to any ongoing arbitration proceedings under collective
bargaining agreements or otherwise or, to the best of the Company's knowledge,
any governmental investigations or inquiries (including, without limitation,
inquiries as to the qualification to hold or receive any license or permit);
and, to the best of the Company's knowledge, there is no valid basis for any of
the foregoing. Neither the Company nor any Subsidiary is subject to any
judgment, order or decree of any court or other governmental agency, and neither
the Company nor any Subsidiary has received any opinion or memorandum or legal
advice from legal counsel to the effect that it is exposed, from a legal
standpoint, to any liability or disadvantage that could have (either
individually or in the aggregate) a Material Adverse Effect.
n. Brokerage. Except as set forth on the attached "Brokerage
--------- ---------
Schedule," there are no claims for brokerage commissions, finders' fees or
- --------
similar compensation in connection with the transactions contemplated by this
Agreement or the Merger Agreement based on any arrange ment or agreement
binding upon the Company or any Subsidiary. The Company shall pay, and hold
each Purchaser harmless against, any liability, loss or expense (including,
without limitation, reason able attorneys' fees and out-of-pocket expenses)
arising in connection with any such claim.
o. Governmental Consent, etc. No permit, consent, approval or
-------------------------
authorization of, or declaration to or filing with, any governmental authority
is required in connection with the execution, delivery and performance by the
Company of this Agreement or the other agreements contemplated hereby, or the
consummation by the Company of any other transactions contemplated hereby or
thereby, except as set forth on the attached "Consents Schedule" and except as
-----------------
expressly contemplated herein or in the exhibits hereto.
p. Insurance. Neither the Company nor any Subsidiary is in default
---------
with respect to its obligations under any insurance policy maintained by it
(except where such default would not (either individually or in the aggregate)
have a Material Adverse Effect), and neither the Company nor any Subsidiary has
been denied insurance coverage. The insurance coverage of the Company
-25-
<PAGE>
and its Subsidiaries is customary for corporations of similar size engaged in
similar lines of business. Except as set forth on the "Insurance Schedule", the
------------------
Company and its Subsidiaries do not have any self-insurance or co-insurance
programs, and the reserves set forth on the Latest Balance Sheet are adequate to
cover all anticipated liabilities with respect to any such self-insurance or co-
insurance programs.
q. Employees. Except as set forth on the attached "Employees
--------- ---------
Schedule," the Company is not aware that any executive or key employee of the
- --------
Company or any Subsidiary or any group of employees of the Company or any
Subsidiary has any plans to terminate employment with the Company or any
Subsidiary. The Company and each Subsidiary have complied in all material
respects with all laws relating to the employment of labor (including, without
limitation, provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other taxes), and
the Company is not aware that it or any Subsidiary has any union organization
activities, threatened or actual strikes or work stoppages or material
grievances. Neither the Company, its Subsidiaries nor, to the best of the
Company's knowledge, any of their employees is subject to any noncompete,
nondisclosure, confidentiality, employment, consulting or similar agreements
relating to, affecting or in conflict with the present or proposed business
activities of the Company and its Subsidiaries, except for agreements between
the Company and its present and former employees.
r. Employee Benefit Plans.
----------------------
i. The attached "Employee Benefit Schedule" sets forth all of the
-------------------------
Company's bonus, deferred or incentive compensation, profit sharing, retirement,
vacation, sick leave, hospitalization or severance plans and all "employee
pension benefit plans" (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or "employee welfare benefit
-----
plans" (as defined in Section 3(1) of ERISA) (the "Plans"). None of the Plans
-----
are subject to Title IV of ERISA nor provide for medical, health or life
insurance or other welfare-type benefits to current or future retired or former
employees of the Company (other than as required by IRC Section 4980B, or
similar state law). The Company is not a participating or contributing employer
in any "multiemployer plan" (as defined in Section 3(37) of ERISA) with respect
to employees of the Company or its subsidiaries, nor has the Company or its
subsidiaries incurred any withdrawal liability with respect to any multiemployer
plan or any liability in connection with the termination or reorganization of
any multiemployer plan.
ii. Each Plan is in all material respects in compliance, and has been
administered in all material respects in accordance, with the applicable
provisions of ERISA and the IRC and all other applicable laws, rules and
regulations, including, but not limited to, medical benefit coverage
continuation under IRC Section 4980B. Neither the company nor, to the Sellers'
knowledge, any fiduciary has (i) engaged in any transaction prohibited by ERISA
or the IRC; (ii) breached any fiduciary duty owed by it with respect to the
Plans described above; or (iii) failed to file and distribute timely and
properly all reports and information required to be filed or distributed in
accordance with ERISA or the IRC.
iii. With respect to the Plans, all required or recommended (in
accordance with historical practices) payments, premiums, contributions or
reimbursements relating to all periods (or
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<PAGE>
partial periods) ending prior to or as of the Closing Date have been made or
properly accrued on the Latest Balance Sheet. None of the Plans has any material
unfunded liabilities which are not reflected on the Latest Balance Sheet. As of
the Closing, the fair market value of the assets of the Pension Plan shall equal
or exceed the present value of all vested and nonvested liabilities thereunder
determined in accordance with Pension Benefit Guaranty Corporation ("PBGC")
----
methods, factors and assumptions applicable to a defined benefit pension plan
terminating on such date.
iv. Each Plan which is intended to be qualified under section 401(a)
of the IRC (i) has been amended to reflect all requirements of the Tax Reform
Act of 1986 and all subsequent legislation which is required to be adopted prior
to the end of the TRA 86 remedial amendment period and (ii) has received from
the Internal Revenue Service a favorable determination letter which considers
the terms of the plan as amended for such tax law changes, and there are no
circumstances that would cause any such Plan to lose such qualified status.
v. The Company has not incurred and has no reason to expect that it
will incur, any Liability to the PBGC (other than PBGC premium payments) or
otherwise under title IV of ERISA (including any withdrawal Liability) or under
the IRC with respect to any employee pension benefit plan that the Company or
any member of its Controlled Group (within the meaning of IRC Section 414(b) and
(c)) maintains or ever has maintained or to which any of them contributes, ever
has contributed, or ever has been required to contribute.
s. Compliance with Laws. Except as set forth on the attached
--------------------
"Compliance Schedule," neither the Company nor any Subsidiary has violated any
- --------------------
law or any governmental regulation or requirement which violation has had or
would reasonably be expected to have (either individually or in the aggregate) a
Material Adverse Effect, and neither the Company nor any Subsidiary has received
notice of any such violation.
t. Environmental and Safety Matters .
--------------------------------
i. For purposes of this Agreement, the term "Environmental and
-----------------
Safety Requirements" shall mean all federal, state, local and foreign statutes,
- -------------------
regulations, ordinances and other provisions having the force or effect of law,
all judicial and administrative orders and determinations, all contractual
obligations and all common law, in each case concerning public health and
safety, worker health and safety and pollution or protection of the environment
(including, without limitation, all those relating to the presence, use,
production, generation, handling, transport, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, Release, threatened
Release, control or cleanup of any hazardous or otherwise regulated materials,
substances or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation); "Release" shall have the meaning
-------
set forth in CERCLA (as defined below); and "Environmental Lien" shall mean any
------------------
recorded Lien in favor of any governmental entity, relating to any liability of
the Company or any Subsidiary arising under any Environmental and Safety
Requirements.
ii. Except as set forth on the attached "Environmental Schedule" or
----------------------
as would not (either individually or in the aggregate) have a Material Adverse
Effect:
-27-
<PAGE>
(1) The Company and its Subsidiaries have complied with and are
currently in compliance with all Environmental and Safety Requirements, and
neither the Company nor its Subsidiaries have received any oral or written
notice, report or information regarding any liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) or any corrective,
investigatory or remedial obligations arising under Environmental and
Safety Requirements which relate to the Company or its Subsidiaries or any
of their properties or facilities.
(2) Without limiting the generality of the foregoing, the
Company and its Subsidiaries have obtained and complied with, and are
currently in compliance with, all permits, licenses and other
authorizations that may be required pursuant to any Environmental and
Safety Requirements for the occupancy of their properties or facilities or
the operation of their businesses.
(3) Neither this Agreement nor the consummation of the
transactions contemplated by this Agreement shall impose any obligations on
the Company and its Subsidiaries or otherwise for site investigation or
cleanup, or notification to or consent of any government agencies or third
parties under any Environmental and Safety Requirements (including, without
limitation, any so called "transaction-triggered" or "responsible property
transfer" laws and regulations).
(4) None of the following exists at any property or facility
owned, occupied or operated by the Company or any of its Subsidiaries: (1)
underground storage tanks or environmentally regulated surface
impoundments; (2) asbestos-containing materials in any form or condition;
or (3) materials or equipment containing polychlorinated biphenyls.
(5) Neither the Company nor any of its Subsidiaries has treated,
stored, disposed of, arranged for or permitted the disposal of,
transported, handled or Released any substance (including, without
limitation, any hazardous substance) or owned, occupied or operated any
facility or property, so as to give rise to liabilities of the Company or
its Subsidiaries for response costs, natural resource damages or attorneys
fees pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), as amended, or any other Environmental
and Safety Requirements.
(6) Without limiting the generality of the foregoing, no facts,
events or conditions relating to the past or present properties, facilities
or operations of the Company or its Subsidiaries shall prevent, hinder or
limit continued compliance with Environmental and Safety Requirements, give
rise to any corrective, investigatory or remedial obligations pursuant to
Environmental and Safety Requirements or give rise to any other liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise) pursuant
to Environmental and Safety Requirements (including, without limitation,
those liabilities relating to onsite or offsite Releases or threatened
Releases of hazardous materials, substances or wastes, personal injury,
property damage or natural resources damage.
-28-
<PAGE>
(7) Neither the Company nor any of its Subsidiaries has, either
expressly or by operation of law, assumed or undertaken any liability or
corrective, investigatory or remedial obligation of any other Person
relating to any Environmental and Safety Requirements.
(8) No Environmental Lien has attached to any property owned,
leased or operated by the Company or any of its Subsidiaries.
u. Affiliated Transactions. Except as set forth on the attached
-----------------------
"Affiliated Transactions Schedule," the information required to be disclosed in
- ---------------------------------
the SEC Documents (as defined in paragraph 5K) regarding compensation of, and
transactions and relationships with, officers, directors or Affiliates of the
Company, has been disclosed as so required in the SEC Documents (as defined in
paragraph 5K).
v. Reports with the Securities and Exchange Commission. The Company
---------------------------------------------------
has furnished the Purchasers with complete and accurate copies of its annual
report on Form 10-K for its two most recent fiscal years, all other reports or
documents required to be filed by the Company pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act since the filing of the most recent annual report
on Form 10-K, its most recent annual report to its stockholders and the
solicitation of proxy statement delivered to the Company's stockholders
regarding the Merger (and all amendments thereof and notices or updates with
respect thereto). Such reports and filings do not contain any material false
statements or any misstatement of any material fact and do not omit to state any
fact necessary to make the statements set forth therein not misleading. The
Company has made all filings with the Securities and Exchange Commission which
it is required to make, and the Company has not received any request from the
Securities and Exchange Commission to file any amendment or supplement to any of
the reports described in this Section.
w. Disclosure. To the best of the Company's knowledge, neither this
----------
Agreement nor any of the exhibits, schedules, attachments, written statements,
documents, certificates or other items prepared or supplied to any Purchaser by
or on behalf of the Company with respect to the transactions contemplated hereby
contain any untrue statement of a material fact or omit a material fact
necessary to make each statement contained herein or therein not misleading.
There is no fact which the Company has not disclosed to the Purchasers in
writing and of which any of its officers, directors or executive employees is
aware and which has had or would reasonably be expected to have a Material
Adverse Effect.
x. Closing Date. The representations and warranties of the Company
------------
contained in this Section 5 and elsewhere in this Agreement and all information
contained in any exhibit, schedule or attachment hereto or in any certificate or
other writing delivered by, or on behalf of, the Company to any Purchaser shall
be true and correct in all material respects on the date of the Closing as
though made after giving effect to the Merger and the other transactions
contemplated by this Agreement to occur on the date hereof.
SECTION 6. DEFINITIONS. For the purposes of this Agreement, the
-----------
following terms have the meanings set forth below:
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<PAGE>
"Affiliate" of any particular Person means any other Person directly
---------
or indirectly controlling, controlled by or under common control with such
particular Person. For purposes of this definition, "control" shall include the
direct or indirect ownership of 10% or more of the voting securities or
interests of such Person.
"Event of Noncompliance" has the meaning set forth in the Certificate
----------------------
of Designation.
"Hardship" shall mean certain facts and circumstances, such as a
--------
medical emergency affecting any current holder of Common Stock (who is a current
employee of the Company or its Subsidiaries) or his immediate family or the need
of such a holder (who is a current employee of the Company or its Subsidiaries)
to pay educational expenses, such as college tuition, as a result of which such
current holder (who is a current employee of the Company or its Subsidiaries
prior to such event) or spouses or other heirs of such employee requests the
Company or the other holders of Common Stock to buy all or some of his Common
Stock, which request the Board of Directors of the Company (or a designated
committee thereof) will permit or deny in its sole discretion.
"Indebtedness" means at a particular time, without duplication, (i)
------------
any indebtedness for borrowed money or issued in substitution for or exchange of
indebtedness for borrowed money, (ii) any indebtedness evidenced by any note,
bond, debenture or other debt security, (iii) any indebtedness for the deferred
or installment purchase price of property or services with respect to which a
Person is liable, contingently or otherwise, as obligor or otherwise (other than
trade payables and other current liabilities incurred in the ordinary course of
business which are not more than 30 days past due), (iv) any commitment by which
a Person assures a creditor against loss (including, without limitation,
contingent reimbursement obligations with respect to letters of credit), (v) any
indebtedness guaranteed in any manner by a Person (including, without
limitation, guaranties in the form of an agreement to repurchase or reimburse),
(vi) any obligations under capitalized leases with respect to which a Person is
liable, contingently or otherwise, as obligor, guarantor or otherwise, or with
respect to which obligations a Person assures a creditor against loss, (vii) any
indebtedness secured by a Lien on a Person's assets and (viii) any unsatisfied
obligation for "withdrawal liability" to a "multiemployer plan" as such terms
are defined under ERISA.
"Intellectual Property Rights" means all (i) patents, patent
----------------------------
applications, patent disclosures and inventions, (ii) trademarks, service marks,
trade dress, trade names, logos and corporate names and registrations and
applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof, (vi) trade
secrets and other confidential information (including, without limitation,
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans and customer and supplier lists and information),
(vii) other intellectual property rights and (viii) copies and tangible
embodiments thereof (in whatever form or medium).
-30-
<PAGE>
"Investment" shall mean amounts paid or agreed to be paid for stock,
----------
securities, liabilities or assets of, or loaned, advanced or contributed to,
other Persons. The term Investments shall not include any increase or decrease
in the assets of any Person derived from the earnings or losses thereof or any
assets purchased in the ordinary course of business, but shall include the
acquisition of a company, business or product line by the Company or any of its
Subsidiaries.
"IRC" means the Internal Revenue Code of 1986, as amended, and any
---
reference to any particular IRC section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified.
"IRS" means the United States Internal Revenue Service, or any
---
successor governmental entity.
"Lien" means any mortgage, pledge, security interest, encumbrance,
----
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Company, any Subsidiary or any Affiliate,
any filing or agreement to file a financing statement as debtor under the
Uniform Commercial Code or any similar statute other than to reflect ownership
by a third party of property leased to the Company or any Subsidiaries under a
lease which is not in the nature of a conditional sale or title retention
agreement, or any subordination arrangement in favor of another Person (other
than any subordination arising in the ordinary course of business).
"Material Adverse Effect" shall mean a material adverse effect on (a)
-----------------------
the business, assets, liabilities, conditions (financial or otherwise) or
prospects of the Company and its Subsidiaries taken as a whole, or (b) the
ability of the Company of any of its Subsidiaries to perform their respective
obligations under this Agreement, the Certificate of Designation, the Articles
of Incorporation, the Subordinated Loan Agreement or the Senior Loan Agreement.
"Material Subsidiary" shall mean any Subsidiary (together with its
-------------------
Subsidiaries) of the Company, which meets any of the following conditions:
(1) The Company's and its other Subsidiaries' Investments in and
advances to such Subsidiary exceed 5.0% of the total assets of the Company
and its Subsidiaries (computed on a consolidated basis either according to
net book value, determined in accordance with generally accepted accounting
principles consistently applied, or fair market value, determined by the
Company's board of directors in its reasonable good faith judgment); or
(2) The Company's and its other Subsidiaries' proportionate
share of the total assets (after intercompany eliminations) of such
Subsidiary exceeds 5.0% of the total assets of the Company and its
Subsidiaries (computed on a consolidated basis either according to net book
value, determined in accordance with generally accepted accounting
principles consistently applied, or fair market value, determined by the
Company's Board of Directors in its reasonable good faith judgment); or
-31-
<PAGE>
(3) The Company's and its other Subsidiaries' equity in the
income from continuing operations before income taxes, extraordinary items
and cumulative effect of a change in accounting principles of such
Subsidiary exceeds 5.0% of such income of the Company and its Subsidiaries
on a consolidated basis, in each case for the most recently completed
fiscal year of the Company.
With respect to any provision in this Agreement that refers to any action taken
by, or any event or circumstance occurring or existing with respect to, a
"Material Subsidiary," the term "Material Subsidiary" as used in such provision
shall also include any group of Subsidiaries taken together as to which (i) if
such Subsidiaries were treated on a consolidated basis as a single Subsidiary,
such consolidated Subsidiary would constitute a "Material Subsidiary" under this
definition, and (ii) such action has been taken by, or such event or
---
circumstance has occurred or exists with respect to, each and all of the
Subsidiaries in such group (disregarding, for purposes of such determination,
whether any such Subsidiary individually constitutes a "Material Subsidiary"
------------
under this definition).
"Officer's Certificate" means a certificate signed by the Company's
---------------------
president or its chief financial officer, stating that (i) the officer signing
such certificate has made or has caused to be made such investigations as are
necessary in order to permit him to verify the accuracy of the information set
forth in such certificate and (ii) to the best of such officer's knowledge, such
certificate does not misstate any material fact and does not omit to state any
fact necessary to make the certificate not misleading.
"Permitted Liens" shall mean Liens permitted under the provisions of
---------------
Section 5.02(b) of the Subordinated Loan Agreement as in effect on the date
hereof.
"Permitted Indebtedness" shall mean Indebtedness permitted under the
----------------------
provisions of Section 5.02(a) of the Subordinated Loan Agreement as in effect on
the date hereof.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, 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.
"Potential Event of Noncompliance" shall mean any occurrence,
--------------------------------
condition, act or omission which with the passage of time or the giving of
notice or both could result in an Event of Noncompliance hereunder.
"Preferred Stock" means (i) the Preferred Stock issued hereunder, and
---------------
(ii) any Preferred Stock issued or issuable with respect to any Preferred Stock
by way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization.
"Purchaser Common Stock" means (i) the Common Stock issued hereunder,
----------------------
(ii) the Common Stock issued or issuable upon exercise of the Warrants and (iii)
any Common Stock issued or issuable with respect to any Purchaser Common Stock
by way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. For
purposes of this Agreement, any Person who holds Warrants shall be deemed
-32-
<PAGE>
to be the holder of the Purchaser Common Stock obtainable upon exercise of such
Warrants regardless of any restriction or limitation on the exercise of the
Warrants, such Purchaser Common Stock shall be deemed to be in existence, and
such Person shall be entitled to exercise the rights of a holder of Purchaser
Common Stock hereunder. As to any particular shares of Purchaser Common Stock,
such shares shall cease to be Purchaser Common Stock when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) distributed to the public
through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force) or (c) repurchased by
the Company or any Subsidiary.
"Restricted Securities" means (i) the Preferred Stock, Common Stock
---------------------
and Warrants issued hereunder, (ii) the Common Stock issued upon exercise of the
Warrants and (iii) any securities issued with respect to any Restricted
Securities by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Restricted Securities, such securities
shall cease to be Restricted Securities when they have (a) been 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 paragraph 7C have been delivered by the
Company in accordance with paragraph 4B. Whenever any particular securities
cease to be Restricted Securities, the holder thereof shall be entitled to
receive from the Company, without expense, new securities of like tenor not
bearing a Securities Act legend of the character set forth in paragraph 7C.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar federal law then in force.
"Securities and Exchange Commission" includes any governmental body or
----------------------------------
agency succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
-----------------------
as amended, or any similar federal law then in force.
"Senior Lenders" shall mean Merrill Lynch Capital Corporation,
--------------
NationsBank, N.A., and their respective successors, assigns and participants
under the Senior Loan Agreement.
"Senior Loan Agreement" shall mean that certain Senior Credit Facility
---------------------
entered into by and among the Company, Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, NationsBank, N.A., and the other financial
institutions party thereto, all notes issued thereunder, all collateral
agreements, and all other agreements and instruments entered into by the parties
thereto in connection therewith, all as originally executed and delivered and as
such agreements and instruments in whole or in part may be, in one or more
agreements with one or more bank lending groups, amended, renewed, extended,
substituted, refinanced, replaced, restructured or otherwise modified from time
to time (including, without limitation, any successive renewals,
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<PAGE>
extensions, substitutions, refinancing, restructuring, replacements and other
modifications of the foregoing), including to increase the commitments
thereunder or to add or eliminate borrowers or guarantors thereunder.
"Subordinated Lender" shall mean SBAF and its respective successors,
-------------------
assigns and participants under the Subordinated Loan Agreement.
"Subordinated Loan Agreement" shall mean that certain Subordinated
---------------------------
Loan Agreement entered into by and among the Company and SBAF, all notes issued
thereunder, and all other agreements and instruments entered into by the parties
thereto in connection therewith, all as originally executed and delivered and as
such agreements and instruments in whole or in part may be, in one or more
agreements with one or more bank lending groups, amended, renewed, extended,
substituted, refinanced, replaced, restructured or otherwise modified from time
to time (including, without limitation, any successive renewals, extensions,
substitutions, refinancing, restructuring, replacements and other modifications
of the foregoing), including to increase the commitments thereunder or to add or
eliminate borrowers or guarantors thereunder.
"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 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 any
managing director or general partner of such limited liability company,
partnership, association or other business entity. For purposes of this
Agreement, if the context does not otherwise indicate in respect of which Person
the term "Subsidiary" is used, the term "Subsidiary" shall refer to a Subsidiary
of the Company.
"Wholly Owned Subsidiary" means, with respect to any Person, a
-----------------------
Subsidiary of which all of the outstanding capital stock or other ownership
interests are owned by such Person or another Wholly Owned Subsidiary of such
Person.
SECTION 7. MISCELLANEOUS.
-------------
a. Expenses. The Company shall pay, and hold each Purchaser and all
--------
holders of Preferred Stock, Warrants and Purchaser Common Stock harmless against
liability for the payment of their reasonable out-of-pocket expenses (including
reasonable attorney's fees and expenses) arising in connection with: (i) the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated by this Agreement which shall be payable at the
Closing or, if the Closing does not occur, payable upon demand, (ii) any
amendments or waivers (whether or not the same become effective) under or in
respect of this Agreement, any of the
-34-
<PAGE>
agreements contemplated hereby, the Articles of Incorporation or the Certificate
of Designation, (including, without limitation, in connection with any proposed
merger, sale or recapitalization of the Company), (iii) stamp and other taxes
which may be payable in respect of the execution and delivery of this Agreement
or the issuance, delivery or acquisition of any shares of Stock at the Closing
or any shares of Common Stock issuable upon exercise of the Warrants, (iv) the
enforcement of the rights granted under this Agreement, any of the agreements
contemplated hereby, the Articles of Incorporation, the Warrants and the
Certificate of Designation and (v) any filing with any governmental agency with
respect to its investment in the Company or in any other filing with any
governmental agency with respect to the Company which mentions such Person.
b. Remedies. Each holder of the Warrants, Preferred Stock and
--------
Purchaser Common Stock shall have all rights and remedies set forth in this
Agreement, the Warrants, the Articles of Incorporation and the Certificate of
Designation and all rights and remedies which such holders have been granted at
any time under any other agreement or contract and all of the rights which such
holders have under any law. Any Person having any rights under any provision of
this Agreement shall be entitled to enforce such rights specifically (without
posting a bond or other security), to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights granted by law.
c. Purchaser's Investment Representations. Each of the Purchasers
--------------------------------------
hereby represents and warrants for itself, severally and not jointly, that:
i. Organization, Good Standing, Power, Authority, Etc. Such
--------------------------------------------------
Purchaser is validly organized and existing and in good standing under the laws
of its jurisdiction of organization and has full power and authority to execute
and deliver this Agreement, the Shareholders' Agreement, the Registration
Agreement and all other agreements contemplated hereby or thereby to which such
Purchaser is a party, and to perform its obligations hereunder or thereunder.
Such Purchaser has taken all necessary corporate or other organizational action
in order to authorize the execution and delivery of this Agreement, the
Shareholders' Agreement, the Registration Agreement and each other agreement
contemplated hereby or thereby to which such Purchaser is a party and the
consummation of the transactions contemplated hereby or thereby, and each such
agreement is a valid and binding obligation of such Purchaser, enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, similar laws affecting creditors' rights
generally or general principles of equity.
ii. No Conflicts; No Consents. Neither the execution and delivery of
-------------------------
this Agreement, the Shareholders' Agreement, the Registration Agreement and all
other agreements contemplated hereby or thereby to which such Purchaser is a
party nor the consummation by such Purchaser of the purchase of Securities
contemplated hereby will (i) conflict with, or result in any violation of, or
constitute any default under, any provision of such Purchaser's organizational
documents, (ii) violate any law or order applicable to such Purchaser or (iii)
violate, conflict with, or result in a breach of any material contracts of such
Purchaser.
iii. Ownership of Securities. As of immediately prior to the date
-----------------------
hereof, such Purchaser does not own any debt or equity securities issued by the
Company.
-35-
<PAGE>
iv. Investor Suitability. Such Purchaser is an "accredited investor"
--------------------
as such term is defined in Rule 501 promulgated under the Securities Act.
v. Disclosure of Information. Such Purchaser acknowledges that it or
-------------------------
its representatives have been furnished with all information regarding the
Company and its business, assets, results of operations and financial condition
that such Purchaser has requested. Each Purchaser further represents that it has
had an opportunity to ask questions of and receive answers from the Company
regarding the Company and its business, assets, results of operations, and
financial condition and the terms and conditions of the issuance of the
Securities; however, no representations or warranties have been made by the
Company to the Purchasers in their capacity as Purchasers except as are set
forth in this Agreement. NOTHING CONTAINED IN THIS PARAGRAPH 7C(V) AND NO
INVESTIGATION, OR NEGLIGENCE OF THE PURCHASERS IN CONNECTION THEREWITH, BY
PURCHASERS SHALL IN ANY WAY AFFECT THE PURCHASERS' RIGHT TO RELY UPON THE
COMPANY'S REPRESENTATIONS AND COVENANTS CONTAINED IN THIS AGREEMENT.
vi. Investment Experience. Each Purchaser represents that it has
---------------------
such knowledge, experience and skill in evaluating and investing in common and
preferred stocks and other securities, based on actual participation in
financial, investment and business matters, so that each is capable of
evaluating the merits and risks of an investment in the Securities and has such
knowledge, experience and skill in financial and business maters that each is
capable of evaluating the merits and risks of the investment in the Company and
the suitability of the Securities as an investment and can bear the economic
risk of an investment in the Securities. No guarantees have been made or can be
made with respect to the future value, if any, of the Securities, or the
profitability or success of the Company's business.
vii. Brokerage. No broker, finder or other party is entitled to
---------
receive from such Purchaser, any brokerage or finder's fee or any other fee,
commission or payment as a result of the transactions contemplated by this
Agreement for which the Company could have any liability or responsibility.
viii. Purchase for Own Account. Such Purchaser is acquiring the
------------------------
Restricted Securities purchased hereunder or acquired pursuant hereto for its
own account with the present intention of holding such securities for purposes
of investment, and that it has no intention of selling such securities in a
public distribution in violation of the federal securities laws or any
applicable state securities laws; provided that nothing contained herein shall
--------
prevent any Purchaser and subsequent holders of Restricted Securities from
transferring such securities in compliance with the provisions of Section 4
hereof.
ix. Restrictive Legends. Each certificate or instrument representing
-------------------
Restricted Securities shall be imprinted with a legend in substantially the
following form:
"The securities represented by this certificate were
originally issued on October 30, 1998, and have not
been registered under the Securities Act of 1933, as
amended. The transfer of the securities represented by
this certificate is subject to the conditions specified
in the Stock and Warrant Purchase Agreement, dated as
of
-36-
<PAGE>
October 30, 1998, and as amended and modified from time
to time, between the issuer (the "Company") and certain
investors, and the Company reserves the right to refuse
the transfer of such securities until such conditions
have been fulfilled with respect to such transfer. A
copy of such conditions shall be furnished by the
Company to the holder hereof upon written request and
without charge."
In addition, certificates representing Preferred Stock shall bear the following
legend:
"The Company will furnish the holder of this
certificate information concerning the designations,
relative rights, preferences and limitations applicable
to each class of shares including the liquidation and
dividend preferences and the voting and conversion
rights of the redeemable convertible preferred stock,
on request in writing and without charge."
d. Acknowledgment Relating to the Preferred Stock. The Company
----------------------------------------------
acknowledges and agrees that the increased dividend rate on the Preferred Stock
provided for in the Certificate of Designation upon the occurrence of certain
Events of Noncompliance has been negotiated by (and is intended by) the Company
and the Purchasers as a reasonable increase in yield necessitated by the
increased risk to the holders of the Preferred Stock which would arise upon any
such occurrence.
e. Indemnification.
---------------
i. General. In consideration of the Purchasers' execution and
------
delivery of this Agreement and acquiring the Securities hereunder and in
addition to all other obligations of the Company under this Agreement, the
Company shall defend, protect, indemnify and hold harmless each Purchaser and
each other holder of Preferred Stock or Purchaser Common Stock, their respective
Affiliates (other than the Company) and each of the foregoing's respective
officers, directors, employees and agents (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
-----------
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements, but
excluding claims and losses arising from the Purchasers' breach hereof or the
Purchasers' gross negligence or willful misconduct (the "Indemnified
-----------
Liabilities"), incurred by the Indemnitees or any of them as a result of, or
- -----------
arising out of, or relating to (i) any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of the sale of
Securities hereunder, or (ii) any breach of any covenant, agreement,
representation or warranty of the Company under this Agreement or any other
instrument, document or agreement contemplated hereby to which the Company is a
party. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
ii. Environmental Liabilities. Without limiting the generality of the
-------------------------
indemnity set out in paragraph 7E(i) above, the Company hereby further agrees to
defend, protect, indemnify and hold harmless each Purchaser and all other
Indemnitees from and against any and all actions,
-37-
<PAGE>
causes of action, suits, losses, liabilities, damages, injuries, penalties,
fees, costs, expenses and claims of any and every kind whatsoever paid, incurred
or suffered by, or asserted against, any Purchaser or any other Indemnitee for,
with respect to, or as a direct or indirect result of, the past, present or
future environmental condition of any property owned, operated or used by the
Company, any Subsidiary, their predecessors or successors or of any offsite
treatment, storage or disposal location associated therewith, including, without
limitation, the presence on or under, or the escape, seepage, leakage, spillage,
discharge, emission, release, or threatened release into, onto or from, any such
property or location of any toxic, chemical or hazardous substance, material or
waste (including, without limitation, any losses, liabilities, damages,
injuries, penalties, fees, costs, expenses or claims asserted or arising under
CERCLA, any so-called "Superfund" or "Superlien" law, or any other federal,
state, local or foreign statute, law, ordinance, code, rule, regulation, order
or decree regulating, relating to or imposing liability or standards on conduct
concerning, any toxic, chemical or hazardous substance, material or waste),
regardless of whether caused by, or within the control of, the Company or any
Subsidiary.
f. Consent to Amendments . Except as otherwise expressly provided
---------------------
herein, the provisions of this Agreement may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of a majority of the outstanding Preferred Stock and the holders of a
majority of the Purchaser Common Stock; provided that any such action with
--------
respect to any of paragraphs 3C, 3D, 7D, or this first proviso of paragraph 7F
shall require only the written consent of the holders of a majority of the
outstanding Preferred Stock; and provided further that any such action with
--------------------
respect to any of paragraphs 3E, 3H, or this second proviso of paragraph 7F
shall require only the written consent of the holders of a majority of the
Purchaser Common Stock then in existence. No other course of dealing between
the Company and the holder of any Preferred Stock, Warrant or Purchaser Common
Stock or any delay in exercising any rights hereunder or under the Articles of
Incorporation or Certificate of Designation shall operate as a waiver of any
rights of any such holders. For purposes of this Agreement, shares of Preferred
Stock or Purchaser Common Stock held by the Company or any Subsidiaries shall
not be deemed to be outstanding.
g. Survival of Representations and Warranties. All representations
------------------------------------------
and warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Purchaser or on its behalf.
h. Successors and Assigns . Except as otherwise expressly provided
----------------------
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for any Purchaser's benefit as a
purchaser or holder of Preferred Stock, the Warrants or Purchaser Common Stock
are also for the benefit of, and enforceable by, any subsequent holder of such
Preferred Stock, such Warrants or such Purchaser Common Stock.
i. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of
-38-
<PAGE>
this Agreement is held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement.
j. Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
k. Descriptive Headings; Interpretation; No Strict Construction. The
------------------------------------------------------------
descriptive headings of this Agreement are inserted for convenience only and do
not constitute a substantive part of this Agreement. Whenever required by the
context, any pronoun used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, and the singular forms of nouns, pronouns,
and verbs shall include the plural and vice versa. Reference to any agreement,
document, certificate, or instrument means such agreement, document, certificate
or instrument as the same is amended, waived or otherwise modified from time to
time in accordance with the terms thereof and, if applicable, hereof. Words such
as "herein," "hereunder," "hereof" and the like shall be deemed to refer to this
Agreement as a whole and not to any particular document or article, Section,
paragraph or other portion of a document. The use of the words "include" or
"including" in this Agreement shall be by way of example rather than by
limitation. The use of the words "or," "either" or "any" shall not be exclusive.
As used herein, "ordinary course of business" means the ordinary course of
business, consistent with past practices, including as to quality and frequency.
The "knowledge" or "awareness" of a Person means the actual knowledge of such
Person (which includes the actual knowledge of all officers, directors and
executive employees of such Person after reasonable inquiry). The parties hereto
have participated jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. The parties
agree that prior drafts of this Agreement shall be deemed not to provide any
evidence as to the meaning of any provision hereof or the intent of the parties
hereto with respect hereto.
l. GOVERNING LAW. THE CORPORATE LAW OF THE STATE OF TEXAS SHALL
-------------
GOVERN ALL ISSUES AND QUESTIONS CONCERNING THE RELATIVE RIGHTS AND OBLIGATIONS
OF THE COMPANY AND ITS STOCKHOLDERS, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW
OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF TEXAS OR ANY
OTHER JURISDICTION) THAT WOULD WITH RESPECT TO SUCH ISSUES OR QUESTIONS CAUSE
THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS.
ALL OTHER ISSUES AND QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY,
ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND THE EXHIBITS AND SCHEDULES
HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW
RULES OR PROVISIONS (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION)
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
m. Notices. All notices, demands or other communications to be given
-------
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, when telecopies to the
-39-
<PAGE>
recipient (with hard copy sent by overnight courier in the manner required
hereunder) if sent prior to 4:00 p.m. New York time on a business day (and
otherwise, on the immediately succeeding business day), one business day after
being sent to the recipient by reputable overnight courier service (charges
prepaid), or three business days after being mailed to the recipient by
certified or registered mail, return receipt requested and postage prepaid. Such
notices, demands and other communications shall be sent to the respective
parties as follows:
To the Company: Norwood Promotional Products, Inc.
106 East Sixth Street, Suite 300
Austin, Texas 78701
Attention: CFO
Telecopy: (512) 477-8603
with copies to: Richard J. McMahon
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Telecopy: (215) 569-5628
William R. Volk
Hughes & Luce, L.L.P.
111 Congress Avenue, Suite 900
Austin, TX 78701
Telecopy: (512) 482-6859
To the Purchasers: c/o Liberty Capital Partners, Inc.
Americas Towers, 34th Floor
1177 Avenue of the Americas
New York, New York 10036
Attention: Paul J. Huston
Telecopy: (212) 354-0336
with a copy to: Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Edward T. Swan
Telecopy: (312) 861-2200
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
n. Complete Agreement. Except as otherwise expressly set forth
------------------
herein, this Agreement and the other agreements, certificates and instruments
contemplated hereby embody the complete agreement and understanding of the
parties hereto and supersede and preempt any prior understandings, agreements or
representations by or among the parties, whether written or oral,
-40-
<PAGE>
which may have related to the subject matter hereof in any way, and such
agreements may not be contradicted or varied by evidence of prior,
contemporaneous or subsequent oral discussions or understandings of the parties.
The parties hereto acknowledge and agree there are no oral understandings or
agreements between them with respect to the subject matter hereof.
o. Schedules. Nothing in any Schedule attached hereto shall be
---------
adequate to disclose an exception to a representation or warranty made in this
Agreement unless such Schedule identifies the exception with particularity and
describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be adequate to disclose an exception to a
representation or warranty made in this Agreement, unless the representation or
warranty has to do with the existence of such document or such other item
itself.
p. Delivery by Facsimile. This Agreement, the agreements referred to
---------------------
herein, and each other agreement or instrument entered into in connection
herewith or therewith or contemplated hereby or thereby, and any amendments
hereto or thereto, to the extent signed and delivered by means of a facsimile
machine, shall be treated in all manner and respects as an original agreement or
instrument and shall be considered to have the same binding legal effect as if
it were the original signed version thereof delivered in person. At the request
of any party hereto or to any such agreement or instrument, each other party
hereto or thereto shall reexecute original forms thereof and deliver them to all
other parties. No party hereto or to any such agreement or instrument shall
raise the use of a facsimile machine to deliver a signature or the fact that any
signature or agreement or instrument was transmitted or communicated through the
use of a facsimile machine as a defense to the formation or enforeceability of a
contract and each such party forever waives any such defense.
* * * * *
-41-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
NORWOOD PROMOTIONAL PRODUCTS, INC.
By: ____________________________________
Its: ____________________________________
THE STATE BOARD OF ADMINISTRATION OF
FLORIDA
By: LIBERTY PARTNERS, L.P.
Its: Attorneys-in-Fact
By: LIBERTY CAPITAL PARTNERS, INC.
Its: General Partner
By: ____________________________________
Its: Managing Director
LIBERTY PARTNERS HOLDINGS 17, L.L.C.
By: LIBERTY PARTNERS, L.P.
Its: Managing Member
By: LIBERTY CAPITAL PARTNERS, INC.
Its: General Partner
By: ____________________________________
Its: Managing Director
[Signature Page for Stock and Warrant Purchase Agreement]
<PAGE>
SCHEDULE OF PURCHASERS
----------------------
<TABLE>
<CAPTION>
Purchase Purchase
Shares of Price of Shares of Price of Number of Number of Purchase Total
Common Common Preferred Preferred Series A Series B Price of Purchase
Stock Stock Stock Stock Warrants Warrants Warrants(1) Price
--------- -------- --------- --------- --------- --------- ----------- --------
Purchaser
- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SBAF -0- -- 20,000 $15,100,000 -0- -0- -- $15,100,000
Liberty 144,928 $3,000,000 -0- -- 565,966 424,474 $9,800,000 $12,800,000
------- ---------- ------ ----------- ------- ------- ---------- -----------
TOTAL 144,928 $3,000,000 20,000 $15,100,000 565,966 424,474 $9,800,000 $27,900,000
</TABLE>
_______________________
(1) Purchase price of Series A Warrant is $4.9 million. Purchase Price of
Series B Warrant is $4.9 million.
<PAGE>
Exhibit B4
THE SHARES EVIDENCED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. SHARES
ACQUIRED BY SHAREHOLDERS MAY NOT BE TRANSFERRED UNLESS SO REGISTERED OR UNLESS
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. ADDITIONAL RESTRICTIONS ON
TRANSFER OF THE SHARES ARE SET FORTH IN THIS AGREEMENT AND IN THE ARTICLES OF
INCORPORATION, BYLAWS AND SHAREHOLDERS' AGREEMENT OF THE CORPORATION.
PURCHASE AGREEMENT
------------------
PURCHASE AGREEMENT dated October 30, 1998 (this "Agreement") between
Norwood Promotional Products, Inc., a Texas corporation (the "Corporation") and
Cirrus, LLC, a Connecticut limited liability company (the "Purchaser").
BACKGROUND
----------
Purchaser desires to purchase, and the Corporation desires to sell certain
shares ("Shares") of common stock, per value $.01 per share ("Common Stock") of
the Corporation upon the terms and conditions contained herein.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein and for the other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto, intending
to be legally bound, agree as follows:
1. PURCHASE FOR SHARES
-------------------
(a) Purchaser hereby agrees to purchase 162,756 Shares, at a price of
$20.70 per Share, for an aggregate purchase price of $3,369,049.20
("Purchase Price").
(b) In payment of the Purchase Price, Purchaser delivers herewith to the
Corporation, the Purchase Price by certified check or by wire transfer
in immediately available funds.
(c) Consummation of the purchase and sale of the Shares (the "Closing")
shall take place simultaneously with the consummation of the Merger
(as defined in the Merger Agreement, dated March 15, 1998, as amended,
by and between the Corporation and FPK, LLC, a Delaware limited
liability company), which consummation shall be a condition precedent
to the Closing hereunder.
2. REPRESENTATIONS AND WARRANTIES AS TO SUITABILITY STANDARDS
----------------------------------------------------------
Purchaser hereby represents and warrants that:
<PAGE>
(a) Purchaser has such knowledge and experience in financial and business
matter that Purchaser is capable of evaluating the merits and risk of
the prospective investment in the Corporation;
(b) Purchaser is acquiring the Shares for Purchaser's own account, not on
behalf of other persons, and for investment and not with a view to
sell or distribute;
(c) Purchaser can bear the economic risk of losing Purchaser's entire
investment;
(d) Purchaser's overall commitment to investments which are not readily
marketable is not disproportionate to Purchaser's net worth,
Purchaser's investment in the Shares will not cause such overall
commitment to become excessive, and the investment is suitable for
Purchaser when viewed in the light of Purchaser's financial situation
and needs;
(e) Purchaser has adequate means of providing for Purchaser's current
needs and personal contingencies;
(f) Purchaser has evaluated all the risks of investment in the
Corporation;
(g) Purchaser has experience in making investment decisions of this type;
(h) Purchaser understands the business in which the Corporation is to be
engaged;
(i) Purchaser is a resident or has been organized under the laws of
Connecticut;
(j) Purchaser otherwise meets any special suitability standards applicable
to Purchaser's state of residence;
(k) Purchaser was not formed for the purpose of making this investment;
and
(l) Purchaser is an "accredited investor" as such term is defined under
the Securities Act of 1933, by virtue of the fact that it or he is:
[PLACE A CHECK MARK NEXT TO AND INITIAL THE APPROPRIATE CATEGORY OR
CATEGORIES]
_____1. A director or executive officer of the Corporation;
_____2. A natural person whose net worth (either individually or jointly with
spouse) exceeds $1,000,000 at the time of this agreement;
_____3. A natural person who had an annual individual income (not joint with
spouse) in excess of $200,000 in each of 1996 and 1997 and reasonably
expects that such individual income will exceed $200,000 in 1998;
<PAGE>
_____4. A natural person who had an annual joint income with spouse in excess
of $300,000 in each of 1996 and 1997 and reasonably expects that such
individual income will exceed $300,000 in 1998;
_____5. A trust, with total assets in excess of $5,000,000, whose purchase is
directed by a sophisticated person as described in Rule 506(b)(2)(ii)
under the Securities Act of 1933, as amended;
_____6. An insurance company as defined in Section 2(13) of the Securities
Act of 1933, as amended;
_____7. An entity in which all of the equity owners are accredited investors
in one or more of the above categories (If this category is checked,
attached a list of all equity owners and indicate which of the above
categories each equity owner meets); or
_____8. An employee benefit plan (within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended), a
"plan" (within the meaning of Section 4975(e) of the Internal Revenue
code of 1986, as amended) or any person whose assets are deemed to be
"plan assets" (within the meaning of 29 C.F.R. 1990S) with total
assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited
investors.
3. TRANSFER RESTRICTIONS
---------------------
(a) Purchaser represents that he understands that the sale or transfer of
the Shares are severely restricted and that:
(i) The Shares have not been registered under the Securities Act of
1933, as amended, or the laws of any other jurisdiction. The
Shares cannot be sold or transferred by Purchaser unless they
are subsequently registered under applicable law or an
exemption from registration is available. The Corporation is
not required to register the Shares to make any exemption from
registration available;
(ii) The right to sell or transfer any of the Shares will be
restricted as set forth in the Corporation's Shareholders'
Agreement, which includes restrictions against sale or transfer
in violation of such agreement, and other restrictions and
requirements; and
(iii) There will be no public market for the Shares and Purchaser may
not be able to sell the Shares. Accordingly, the Purchaser must
bear the economic risk of Purchaser's investment for an
indefinite period of time.
<PAGE>
(b) Purchaser agrees that he will not sell or offer to sell or transfer
the Shares or any part thereof or interest therein without
registration under the Securities Act of 1933, as amended, and
applicable state securities laws or unless an exemption from such
registration is available.
4. PURCHASER'S REPRESENTATIONS AND WARRANTIES
------------------------------------------
Purchaser represents and warrants that:
(a) Purchaser has received, has carefully read and understands the
Corporation's (i) Proxy Statement dated July 22, 1998 ("Proxy
Statement"), (ii) Preliminary Offering Memorandum dated July 30, 1998
(the "Offering Memorandum") and (iii) Notice to Shareholders dated
October 20, 1998 (the "Notice");
(b) Purchaser has been furnished with all additional documents and
information that Purchaser has requested;
(c) Purchaser has had the opportunities to ask questions of and received
answers from the Corporation concerning the Corporation and the Shares
and to obtain any additional information necessary to verify the
accuracy of the information furnished;
(d) Purchase has relied only on the foregoing information and documents in
determining to make this purchase;
(e) The information in this Agreement (including the information set forth
on the signature page hereto) is true, correct and complete at this
date;
(f) The Proxy Statement, Offering Memorandum and Notice and other
information furnished by the Corporation do not constitute investment,
accounting, legal or tax advice and Purchaser is relying on
professional advisers for such advice;
(g) All documents, records and books pertaining to the Purchaser's
investment have been made available for inspection by the Purchaser
and by the Purchaser's attorney, and/or Purchaser's accountant, and/or
Purchaser's purchaser representative. The books and records of the
Corporation will be available upon reasonable notice from Purchaser
during reasonable business hours at the Corporation's principal place
of business;
(h) Purchaser recognizes that an investment in the Shares involves
substantial risks, including, but not limited to, those set forth
under "Risk Factors" in the Offering Memorandum and in Corporation's
Annual Report on Form 10-K attached to the Proxy Statement as Appendix
F;
<PAGE>
(i) Purchaser understands, acknowledges and agrees that the Corporation is
relying upon the representations and warranties made herein in
determining to sell Purchaser the Shares; and
(j) Purchaser is validly organized and existing and in good standing under
the laws of its jurisdiction of organization and has the full power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder. Purchaser has taken all action required by
law, its organizational documents or otherwise required to be taken by
it to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement
is enforceable against Purchaser in accordance with its terms.
5. INDEMNIFICATION AND HOLD HARMLESS
---------------------------------
Purchaser agrees that if he breaches any agreement, representation or
warranty he has made in this Agreement, that he will indemnify and hold harmless
the Corporation, its officers and directors and each and every other shareholder
of the Corporation against any claim, liability, loss, damage or expense
(including attorneys' fees and other costs of investigating and litigating
claims) caused, directly or indirectly, by his breach.
6. MISCELLANEOUS
-------------
(a) This Agreement and the rights and obligations of the parties hereunder
shall be interpreted in accordance with the laws of the State of Texas
without reference to its conflict of law rules.
(b) This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but the several counterparts
together shall constitute but one and the same instrument.
(c) The Purchaser agrees that it shall be bound by all of the terms and
provisions of the Corporation's Articles of Incorporation, as amended,
Bylaws and Shareholders' Agreement by and among the Corporation and
its shareholders and shall have all rights and obligations of a holder
of Common Stock thereunder.
(d) Insofar as possible, each provision of this Agreement shall be
interpreted so as to render it valid and enforceable under applicable
law and severable from the remainder of this Agreement. A finding
that any such provision is invalid or unenforceable in any
jurisdiction shall not affect the validity or enforceability of any
other provision or the validity or enforceability of such provision
under the law of any other jurisdiction.
<PAGE>
(e) Each of the parties agrees to execute all such further instruments and
documents and to take all such further action as the other party may
reasonably require in order to effectuate the terms and purposes of
this Agreement.
(f) For purposes of this Agreement, singular terms include the plural and
vice versa and any pronoun of one gender includes the other gender or
the neuter.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the date first above written.
Agreed and Accepted:
PURCHASER: NORWOOD PROMOTIONAL
PRODUCTS, INC.
CIRRUS, LLC
By: /s/ Timothy Tully By: /s/ Frank Krasovec
-------------------------- --------------------------
Name: Timothy Tully Name: Frank Krasovec
Title: Managing Member Title: President
Business Address:
______________________________________
Street Name and Number
______________________________________
City/State/ZIP Code
______________________________________
Telephone Number
______________________________________
Social Security/Taxpayer Identification Number
<PAGE>
EXHIBIT E
NORWOOD PROMOTIONAL PRODUCTS, INC.
SHAREHOLDERS' AGREEMENT
Dated October 30, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. CERTAIN DEFINITIONS........................................................ 1
2. RESTRICTION UPON PLEDGES OR TRANSFERS OF SECURITIES........................ 3
A. Restriction on Pledge of Securities.................................. 4
B. General Restrictions on Transfers of Securities...................... 4
3. PERMITTED SALES OF SECURITIES.............................................. 5
A. Offer................................................................ 5
B. Option to the Corporation............................................ 5
C. Option to the Non-Selling Shareholders............................... 5
D. Purchase of All Securities........................................... 6
E. Delivery After Exercise of Option.................................... 6
F. Right to Transfer.................................................... 6
G. Drag-Along/Tag-Along Rights.......................................... 7
H. Certain Shareholders................................................. 8
4. MANDATORY OFFERS OF SECURITIES............................................. 8
A. When Offers Deemed Made.............................................. 8
B. Option to the Corporation............................................ 8
C. Option to Non-Affected Shareholders.................................. 9
D. Mandatory Purchase by the Corporation Upon Certain Triggering Events. 9
E. Delivery After Exercise of Option.................................... 9
F. No Right to Transfer................................................. 10
G. Restrictions on the Corporation's Obligations........................ 10
5. PRICE...................................................................... 10
A. Agreement Price...................................................... 10
B. Voluntary Adjustments................................................ 10
C. Automatic Adjustments................................................ 10
D. Stock Splits, etc.................................................... 11
6. PAYMENT TERMS.............................................................. 11
A. Generally............................................................ 11
B. Interest............................................................. 12
C. Promissory Note...................................................... 12
D. Security............................................................. 12
7. INDEBTEDNESS OF SHAREHOLDER................................................ 12
8. LEGAL PROHIBITION.......................................................... 13
9. BOARD OF DIRECTORS......................................................... 13
10. ENDORSEMENT UPON SHARE CERTIFICATE......................................... 14
11. REVIEW PRIOR TO TRANSFER................................................... 14
12. TERMINATION................................................................ 14
13. NOTICES.................................................................... 15
14. TERMINATION OF PRIOR SHAREHOLDERS' AGREEMENTS.............................. 15
15. EXECUTION OF OTHER DOCUMENTS............................................... 15
16. CONSENT OF SPOUSES......................................................... 15
17. VOTING UNDER THIS AGREEMENT................................................ 15
18. MISCELLANEOUS.............................................................. 15
</TABLE>
STOCK OWNERSHIP EXHIBIT "A"
AMENDMENT EXHIBIT "B"
CERTIFICATE OF AGREEMENT PRICE EXHIBIT "C"
FORM OF NON-NEGOTIABLE PROMISSORY NOTE EXHIBIT "D"
FORM OF STOCK PLEDGE AGREEMENT EXHIBIT "E"
CONSENT OF SPOUSES EXHIBIT "F"
<PAGE>
SHAREHOLDERS' AGREEMENT
-----------------------
This Shareholders' Agreement (the "Agreement") dated October 30, 1998 by
and among NORWOOD PROMOTIONAL PRODUCTS, INC., a Texas corporation (the
"Corporation"), and the SHAREHOLDERS listed on Exhibit "A" attached hereto who
are sometimes hereinafter referred to individually as a "Shareholder" and
collectively as "Shareholders".
BACKGROUND
----------
Shareholders are the owners of all of the issued and outstanding shares of
the common stock, par value $.01 per share, of the Corporation, and certain
warrants to purchase shares of such common stock, in each case as described in
Exhibit "A" attached hereto, which exhibit shall be updated from time to time to
include future Shareholders. The parties desire to enter into an agreement to
impose certain restrictions and obligations on themselves and on the shares of
the common stock of the Corporation in order to provide for the continuity of
the Corporation's management and to promote their mutual interests.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
contained herein, and intending to be legally bound hereby, the parties agree as
follows:
1. CERTAIN DEFINITIONS.
-------------------
As used in this Agreement, the following terms have the following
meanings unless the context otherwise requires:
A. "Affiliate" of any Person (including a Shareholder) means any
other Person directly or indirectly controlling, controlled by or under common
control with such Person. For purposes of this definition, "control" shall
include the direct or indirect ownership of 10% or more of the voting securities
or interests of such Person.
B. "Agreement Price" means the purchase price of a share of Stock as
set forth in Section 5 herein.
C. "Agreement Terms" means the Agreement Price and the payment terms
set forth in Section 6 herein.
D. "Allen Group" means Allen & Company Incorporated, John H.
Josephson
and Stanley S. Shuman.
E. "Ares" means Ares Leveraged Investment Fund, L.P.
F. "Articles of Incorporation" means the articles of incorporation
of the Corporation, including the certificate of designation regarding the
Series A preferred stock of Corporation, as may be amended and modified by law
and pursuant to its terms.
1
<PAGE>
G. "Disability"or "Disabled" means the inability of an MBO
Shareholder to perform the normal duties he was performing on behalf of the
Corporation by reason of any physical or mental illness, incapacity, sickness,
or disability for a continuous period of six months or for a cumulative period
of six months during any nine-month period. Any dispute as to whether an MBO
Shareholder has suffered a Disability, as to the date any Disability began or as
to the duration of any Disability shall be settled by a medical expert selected
and paid for by the Corporation, whose written report shall be final and binding
upon the parties.
H. "EBITDA" means the Corporation's consolidated net income before
interest, income taxes, depreciation and amortization for a trailing 12-month
period as determined by the independent certified public accountants then
engaged by the Corporation in accordance with generally accepted accounting
principles, consistently applied, which determination shall be final and
binding.
I. "Hardship" means certain facts and circumstances, such as a
medical emergency concerning an MBO Shareholder or his immediate family or an
MBO Shareholder's need to pay educational expenses such as college tuition, as a
result of which an MBO Shareholder (or his heirs and successors) requests the
Corporation or the other Shareholders to buy all or some of his Securities,
which request the Board of Directors of the Corporation (or a designated
committee thereof) will permit or deny in its sole discretion.
J. "Krasovec" means Frank P. Krasovec.
K. "Liberty" means Liberty Partners Holdings 17, L.L.C.
L. "MBO Shareholders" mean James P. Gunning, Jr., J. Max Waits, John
Finnell, James Preston, Paul W. Larson, Russell A. Devereau, George Bell Strob,
Brian P. Miller, David Kagel and Robin Fennell and any future Shareholder who
is an employee of the Corporation or one of its subsidiaries.
M. "Permitted Transferee" means (i) with respect to a Shareholder
that is an individual, any family members of the Shareholder and any trusts
established for the benefit of family members of the Shareholder (family members
for purposes of this Agreement shall mean parents, spouse, children, brothers or
sisters of such Shareholder), (ii) with respect to a Shareholder that is a
corporation, partnership or limited liability company, any officers, directors,
shareholders, partners or members or (iii) any Affiliate of such transferring
Shareholder.
N. "Person" means any individual, corporation, partnership, limited
liability company, joint venture, trust or unincorporated organization, joint
stock company or other similar organization, government or political subdivision
thereof, court or any other legal entity whether acting in an individual,
fiduciary or other capacity.
O. "Purchase Price" means the total amount paid to any Selling
Shareholder (as defined in Section 3A herein) or Affected Shareholder (as
defined in Section 4A herein) for his
2
<PAGE>
Securities, as determined by multiplying the number of shares purchased by the
price contained in the Offer Terms (as defined in Section 3A herein) or by the
Agreement Price, as applicable.
P. "SBAF Debt" means all indebtedness for borrowed money (including
all principal, interest and premium (if any) with respect thereto) outstanding
under the Subordinated Loan Agreement, dated as of October 30, 1998 between the
Corporation and The State Board of Administration of Florida and all other
payment and reimbursement obligations of the Corporation thereunder, as the same
may be amended and modified pursuant to its terms, and including all
refinancing, replacements and extensions thereof.
Q. "Securities" means Stock and Warrants, collectively.
R. "Senior Credit Facility" means the Credit Agreement dated as of
October 30, 1998 among the Corporation, each of Subsidiary Guarantors named
therein, each of the lenders named therein, Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and Montgomery Securities
LLC as Arrangers, Merrill Lynch as Syndication Agent and Documentation Agent and
NationsBank, N.A. as Administrative Agent, including any deferrals, renewals,
extensions, replacements, refinancings or refundings thereof, or amendments,
modifications or supplements thereto, whether by or with the same or any other
lender, creditor, group of lenders or group of creditors, and including related
notes, guarantees and note agreements and other instruments and agreements
executed in connection therewith.
S. "Shareholders" means all Persons who are owners or who are
becoming owners of Securities under this Agreement.
T. "Stock" means all of the issued and outstanding shares of the
common stock of the Corporation which are now or shall hereafter be owned or
held by Shareholders.
U. "Transfer" means the disposing of or parting with all or a
portion of any interest (record or beneficial) by any means, direct or indirect,
absolute or conditional, voluntary or involuntary, including, but not limited
to, by sale, assignment, court order, operation of law, equitable or other
distribution after divorce or separation, settlement, exchange, abandonment,
waiver, gift, alienation, bequest or disposal.
V. "Triggering Event" means any of the events set forth in
subsection 4A herein.
W. "Warrants" means the stock purchase warrants issued to Liberty
and Allen & Company Incorporated which are exercisable into shares of Stock.
2. RESTRICTION UPON PLEDGES OR TRANSFERS OF SECURITIES.
---------------------------------------------------
A. Restriction on Pledge of Securities. Other than pledges which
-----------------------------------
exist as of the date hereof (including any renewals, replacements or extensions
thereof), no Shareholder shall pledge, hypothecate or otherwise encumber any
share underlying a Security without the express prior
3
<PAGE>
written consent of the Board of Directors of the Corporation; provided, however
-------- -------
that Ares shall be permitted to pledge its Stock so long as such pledgee agrees
in writing prior to the pledge to become a party to and be bound by this
Agreement as a Shareholder upon foreclosure by signing an amendment in the form
of Exhibit "B" to this Agreement prior to or on the date of foreclosure.
B. General Restrictions on Transfers of Securities.
-----------------------------------------------
(1) Restrictions. No Shareholder shall Transfer any Securities
------------
without the prior written consent of the holders of 75% of the Stock, except as
provided in Sections 2A, 3 and 4 of this Agreement and except to a Permitted
Transferee. Without limiting the foregoing, a Transfer permitted under this
Agreement (including to a Permitted Transferee) shall be effective only if the
transferee (if not otherwise a party to this Agreement) agrees in writing to
become a party to and be bound by this Agreement as a Shareholder by signing an
amendment in the form of Exhibit "B" to this Agreement prior to or on the date
of Transfer. In the case of a transferee that is a trust, a Transfer permitted
under this Agreement will be effective only if the fiduciaries of such trust
agree in writing to become parties to and be bound by this Agreement, by signing
an amendment in the form of Exhibit "B" to this Agreement prior to or on the
date of Transfer and agree that, not later than 10 days prior to the termination
of such trust, they shall give written notice to the beneficiaries of the trust
that such beneficiaries must sign, prior to the termination of such trust and
the distribution of the Stock from such trust, an amendment to this Agreement,
in the form attached hereto as Exhibit "B".
(2) Enforcement. The parties recognize and acknowledge that any
-----------
Transfer of Securities by a Shareholder in violation of the provisions of this
Agreement may result in irreparable damage in the event that this Agreement is
not specifically enforced. Accordingly, if any dispute arises regarding any
Transfer of Securities or any interest therein, the parties agree that any party
shall be entitled without showing actual damage, to a temporary or permanent
injunction restraining such Transfer pending determination of such controversy
and that no bond or other security shall be required in connection with such
action. If any dispute arises concerning the rights or obligations of any party
under this Agreement including, but not limited to, the right of any party to
Transfer Securities, such right or obligation shall be enforceable by a decree
of specific performance.
(3) Effect of Prohibited Transfers. Any Transfer of Securities
------------------------------
in violation of any provision of this Agreement shall be void as of the time of
such Transfer. Any purported Transfer of Securities in violation of this
Agreement shall not affect the beneficial or record ownership of Securities, and
the Shareholder making a purported Transfer of Securities shall retain the right
to receive dividends and liquidation proceeds. The Corporation shall not record
in its books or otherwise recognize any such purported or intended Transfer of
Securities, whether by operation of law or otherwise, and such purported or
intended Transfer shall be null, void and of no force or effect.
4
<PAGE>
3. PERMITTED SALES OF SECURITIES. Other than sales set forth on Appendix
-----------------------------
"1" to Exhibit "A" attached hereto which shall occur as soon as practicable
after the date hereof, for two years from the date hereof, no Shareholder may
sell his Securities (other than to a Permitted Transferee) without the prior
written consent of the holders of at least 75% of the Stock. After two years
from the date hereof, a Shareholder may sell his Securities in strict accordance
with the provisions of Section 2 and the following terms and conditions:
A. Offer. If a Shareholder ("Selling Shareholder") desires to sell
-----
all or any part of his Securities, or receives a bona fide written offer to
purchase all or part of his Securities ("Offer") which he desires to accept, he
must offer to sell such Securities first to the Corporation, and then to the
other Shareholders ("Non-Selling Shareholders"), in accordance with subsections
3B and 3C herein, by giving written notice of the Offer ("Notice") to the
Corporation and the Non-Selling Shareholders setting forth the number of shares
of Stock and/or the Warrant(s) the Selling Shareholder proposes to sell and, if
the Selling Shareholder has received an Offer, a copy of the Offer (which shall
disclose the identity of the prospective purchaser and the material terms of the
transaction). If a Shareholder desires to sell all or part of his Securities
under this section but has not received an Offer, or if the offer to sell is
pursuant to a Triggering Event under Section 4A, the sale shall be on the
Agreement Terms. If the Shareholder receives an Offer to purchase all or any
portion of his Securities, the sale shall be on either (i) the Agreement Terms
or (ii) the terms and conditions contained in such offer ("Offer Terms"), as the
purchaser under this section shall elect by notice to the Selling Shareholder
given with the notice of the intention to purchase.
B. Option to the Corporation. The Corporation shall have the option
-------------------------
to purchase, insofar as it may be permitted by law and by the Corporation's
Senior Credit Facility, SBAF Debt and Articles of Incorporation, all or any part
of the Securities that the Selling Shareholder proposes to sell ("Offered
Securities") and may exercise the option by giving written notice of exercise to
the Selling Shareholder and the Non-Selling Shareholders, within 15 days after
the date of the Notice of the Offer. The notice of exercise need only state
acceptance of the Offer but the Corporation must notify the Selling Shareholder
at or prior to closing on the sale of Securities whether it has exercised its
option either on (i) the Offer Terms or (ii) the Agreement Terms. The notice
shall state whether the Corporation intends to purchase all or merely a part of
the Selling Shareholder's Securities. If the Corporation intends to purchase
merely a part, the exercise will be effective only if the options are exercised
by the Non-Selling Shareholders, pursuant to Subsection 3C herein, to purchase
the balance of the Selling Shareholder's Securities. The Selling Shareholder
shall not participate (including, but not limited to, voting as a shareholder or
as a director of the Corporation) in the Corporation's decision to purchase or
refuse to purchase the Offered Securities.
C. Option to the Non-Selling Shareholders. If the Corporation does
--------------------------------------
not exercise its option to purchase all of the Offered Securities, the Non-
Selling Shareholders subject to subsection 3D herein, shall have the option to
purchase all or any balance of the Offered Securities and may exercise their
respective options by giving written notice of exercise to the Corporation, the
Selling Shareholder and the Non-Selling Shareholders within 30 days after the
date of the Notice of the Offer. The notice of exercise need only state
acceptance of the Offer but the Non-Selling Shareholders must notify the Selling
Shareholder at or prior to closing on such sale of Securities
5
<PAGE>
whether he has exercised his option either on (i) the Offer Terms or (ii) the
Agreement Terms. The notice given by each Non-Selling Shareholder shall state
the maximum number of shares of the Offered Securities which he is willing to
purchase. Each Non-Selling Shareholder shall have the option to purchase that
proportion, rounded to the nearest whole number to eliminate fractional shares,
of the Offered Securities which the number of shares of Securities held by such
Non-Selling Shareholder bears to the number of shares of Securities held by all
Non-Selling Shareholders. If a Non-Selling Shareholder does not exercise his
option to purchase his full proportionate share of the Offered Securities, the
Non-Selling Shareholders who have exercised their options may purchase the
Securities not purchased by such Non-Selling Shareholder in such proportions as
they shall agree upon or, failing such agreement, pro rata (based on the
ownership of the participating Non-Selling Shareholders), by giving written
notice of the exercise of their options to the Corporation and the Selling
Shareholder within 40 days after the date of the Notice of the Offer.
D. Purchase of All Securities. Unless otherwise agreed to by the
--------------------------
Selling Shareholder, all and not less than all of the Offered Securities must be
purchased pursuant to subsections 3B and 3C herein by the Corporation and/or the
Non-Selling Shareholders in order that there shall be a purchase of said Offered
Securities within the intent, scope and terms of this Agreement.
E. Delivery After Exercise of Option. If the Corporation and/or the
---------------------------------
Non-Selling Shareholders shall have exercised their options to purchase the
Offered Securities, closing on such sale shall be held and all certificates for
the Securities (or, if the Securities is subject to pledge, hypothecation or
other encumbrance, evidence of the Selling Shareholder's rights therein) shall
be delivered to the purchaser(s) thereof, duly endorsed for transfer, within 55
days after the date of the Notice of the Offer to purchase the Offered
Securities (the "Transfer Date") at the then principal office of the
Corporation. In the event the Corporation and/or the Non-Selling Shareholders
do not give written notice as to whether the purchase of the Selling
Shareholder's Securities will be on the Offer Terms or on the Agreement Terms
prior to the Transfer Date, then such written notice shall be given on the
Transfer Date. At the closing of such sale, the Selling Shareholder shall
represent and warrant to the purchaser that (i) he/it is the record and
beneficial owner of the Offered Securities, free and clear of all claims, liens,
pledges and encumbrances, (ii) he/it has the full right, power, authority and
capacity to sell, transfer, assign and convey the Offered Securities in
accordance with the terms of this Agreement; and (iii) upon delivery of the
Offered Securities in accordance with the terms of this Agreement, the purchaser
shall acquire good and marketable title to the Offered Securities, free and
clear of all claims, liens, pledges and encumbrances.
F. Right to Transfer. If all of the Offered Securities is not
-----------------
purchased under Sections 3B and 3C, the Selling Shareholder may, for a period of
six months following the final date for acceptance under subsection 3C, sell the
Offered Securities to the Person who made the Offer ("Offeror"); provided,
however, that such Securities are sold to the Offeror upon the Offer Terms, and
provided further that such Offeror agrees in writing to assume performance of
and to be bound by the terms and conditions of this Agreement as a Shareholder
hereunder. If the Selling Shareholder wishes to sell his Securities on other
than the Offer Terms or has not sold such Securities on the Offer Terms within
that six-month period, he shall be obliged to make new offers
6
<PAGE>
and re-offers to the Corporation and the Non-Selling Shareholder(s), in
accordance with subsections 3A, 3B, 3C, 3D and 3E herein, before he shall be
permitted to Transfer his Securities, or any part thereof, to any Person.
G. Drag-Along/Tag-Along Rights:
---------------------------
(1) Drag-Along Rights. In the event that (i) the holders of
-----------------
more than 50% of all of the Stock (including stock underlying the Warrants) of
the Corporation sell all of their Securities pursuant to Section 3F hereof, in a
single transaction or in a series of related transactions to an Offeror (other
than a Permitted Transferee), and (ii) the Offeror requires, as a condition of
such sale by such Shareholders, that the Offeror acquire all of the Securities,
then each Shareholder agrees to join in the sale by such Shareholders to the
Offeror on the same terms and conditions, which shall not be more favorable to
the Offeror than the Offer Terms. Further, at the request of such holders of
more than 50% of all of the Stock (including stock underlying the Warrants), the
Shareholders agree to join in, and to vote their Securities in favor of, any
agreement providing for the sale of all or substantially all of the
Corporation's assets to any Person (other than a Permitted Transferee), or the
merger or consolidation of the Corporation with or into another Person (other
than a Permitted Transferee).
(2) Tag-Along Rights. In the event that a Selling Shareholder
----------------
or group of Selling Shareholders ("Group") in a single transaction or in a
series of related transactions shall be permitted to sell Offered Securities
which constitutes in the aggregate at least 10% of the Stock (including stock
underlying the Warrants) to the Offeror pursuant to Section 3F hereof, the
Selling Shareholder or Group shall give the Non-Selling Shareholders written
notice at least 15 days prior to any and all such sales. Each Non-Selling
Shareholder shall have the right, as a condition of such sale by the Selling
Shareholder or Group, to sell to the Offeror, on the same terms and conditions
as the Selling Shareholder or Group, that proportion (rounded to the nearest
whole number to eliminate fractional shares) of Offered Securities which the
number of shares of Securities owned by such Non-Selling Shareholder bears to
the number of shares of Securities owned by all participating Shareholders
(including the Selling Shareholder or Group), and the number of shares of
Offered Securities that the Selling Shareholder or Group may sell pursuant to
such Offer shall be correspondingly reduced. Each Non-Selling Shareholder
desiring to participate in any such sale shall notify the Selling Shareholder or
Group of such intention within 10 days after notice is given in accordance with
the first sentence of this Section 3G(2).
(3) Upon any sale under Section 3G(1) or (2), each participating
Shareholder agrees that he/it shall be responsible for the expenses and
indemnity obligations, if any, of such sale, equal to the proportion that such
Shareholder's Securities bears to the total number of shares underlying the
Securities held by all participating Shareholders.
H. Certain Shareholders. Notwithstanding anything contained in this
--------------------
Agreement to the contrary, (i) any offer or sale of Securities by Krasovec,
Liberty, the Allen Group, Cirrus, LLC or Ares pursuant to this Section 3 shall
be on the Offer Terms and not on the Agreement Terms and (ii) nothing contained
in this Agreement (including the first sentence of this Section 3), shall
prohibit
7
<PAGE>
Krasovec from (a) selling up to $500,000 of his Stock in any year of this
Agreement (including the first two years of this Agreement) up to a maximum
aggregate of 15% of his Stock (on a fully diluted basis) owned as of the date
hereof and (b) selling up to an additional $500,000 of his Stock in the
aggregate to present or future directors of the Corporation, and such sales
pursuant to clauses (a) and (b) of this Section 3H(ii) shall not be required to
be made in accordance with section 3A, 3B, 3C and 3D.
4. MANDATORY OFFERS OF SECURITIES.
------------------------------
A. When Offers Deemed Made. Upon the occurrence of any of the
-----------------------
following events ("Triggering Event"), the MBO Shareholder to whom the event
relates or his personal representative ("Affected Shareholder"), shall be deemed
to have made an offer to sell all of his Securities (or all or part of his
Securities if there is a Section 4(A)(3) or (4) Triggering Event) first to the
Corporation and then to the others Shareholders ("Non-Affected Shareholders") in
accordance with subsections 4B and 4C herein:
(1) The death of an MBO Shareholder;
(2) The Disability of an MBO Shareholder;
(3) At the option of the MBO Shareholder, the retirement from
the Corporation of an MBO Shareholder after (i) attaining the age of 65 (or, in
the case of Russell A. Devereau, at any age) or (ii) 30 years of employment with
the Corporation;
(4) At the option of the MBO Shareholder, the Hardship of an MBO
Shareholder;
(5) The termination of an MBO Shareholder's employment by the
Corporation for any reason (either with or without cause); or
(6) The voluntary election by an MBO Shareholder to terminate
his employment with the Corporation.
Within 10 days after the occurrence of any of the above events, the Affected
Shareholder or his personal representative shall serve notice of such occurrence
("Triggering Event Notice") upon the Corporation and the Non-Affected
Shareholders. Failure of the Affected Shareholder to give a Triggering Event
Notice shall in no way prevent the Corporation or the Non-Affected Shareholders
from exercising their rights under this Section.
B. Option to the Corporation. Upon the occurrence of a Triggering
-------------------------
Event, and subject to Section 4D, the Corporation shall have the option to
purchase, insofar as it may be permitted by law and by the Corporation's Senior
Credit Facility, SBAF Debt and Articles of Incorporation, on the Agreement Terms
all or any part of the Securities offered by the Affected Shareholder ("Affected
Securities") on the date the Triggering Event occurred, and may exercise its
8
<PAGE>
option by giving written notice of exercise to the Affected Shareholder and the
Non-Affected Shareholders at any time until 30 days after the date of the
Triggering Event Notice. The notice shall state whether the Corporation intends
to purchase all or merely a part of the Affected Securities. The Affected
Shareholder shall not participate (including, but not limited to, voting as a
shareholder or as a director of the Corporation) in the Corporation's decision
to purchase or refuse to purchase the Affected Securities.
C. Option to Non-Affected Shareholders. If the Corporation does not
-----------------------------------
exercise its option to purchase all of the Affected Securities, subject to
subsection 4D herein, the Non-Affected Shareholders shall have the option to
purchase all or any balance of the Securities on the Agreement Terms and may
exercise their options by giving written notice of exercise to the Corporation,
Affected Shareholder and the other Non-Affected Shareholders within 45 days
after the date of the Notice of the Triggering Event. The notice given by each
Non-Affected Shareholder shall state the maximum number of shares of the
Affected Securities which he is willing to purchase. Unless otherwise agreed to
by the Non-Affected Shareholders, each Non-Affected Shareholder shall have the
option to purchase that proportion, rounded to the nearest whole number to
eliminate fractional shares, of the Affected Securities which the number of
shares of Securities held by such Non-Affected Shareholder bears to the number
of shares of Securities held by all participating Non-Affected Shareholders. If
a Non-Affected Shareholder does not exercise his option to purchase his full
proportionate share of the Affected Securities, the Non-Affected Shareholders
who have exercised their options may purchase the Securities not purchased by
such Non-Affected Shareholder in such proportions as they shall agree upon or,
failing such agreement, pro rata (based on the ownership of the participating
Non-Affected Shareholders), by giving written notice of the exercise of their
options to the Affected Shareholder within 60 days after the date of the Notice
of the Triggering Event.
D. Mandatory Purchase by the Corporation Upon Certain Triggering
-------------------------------------------------------------
Events. If the Triggering Event is a Section 4(A)(1), (2), (3), (4) or (5)
- ------
Triggering Event, and the Non-Affected Shareholders do not exercise their
options to purchase all of the Affected Securities within 60 days after the date
of the Notice of the Triggering Event (the "Purchase Date"), then the
Corporation shall purchase on the Purchase Date all or any balance of the
Affected Shareholder's Securities on the Agreement Terms, subject to the terms
contained in Section 6A(2) of this Agreement.
E. Delivery After Exercise of Option. If the Corporation and/or the
---------------------------------
Non-Affected Shareholders shall have exercised their options, or if the
Corporation is required to purchase the Securities of an Affected Shareholder
pursuant to subsection 4D herein, closing on such sale shall be held and all
certificates for the Affected Securities (or, if the Securities is subject to
pledge, hypothecation or other encumbrance, evidence of the Affected
Shareholder's rights therein) shall be delivered to the purchasing party(ies)
duly endorsed for transfer, within 70 days after the date of the Notice of the
Triggering Event to purchase said Affected Securities (the "Delivery Date") at
the then principal office of the Corporation. At the closing of such sale, the
Affected Shareholder (or his personal representative) shall represent and
warrant to the purchaser that (i) he/it is the record and beneficial owner of
the Affected Securities, free and clear of all claims, liens, pledges and
encumbrances, (ii) he/it has the full right, power, authority and capacity to
sell, transfer, assign and
9
<PAGE>
convey the Affected Securities in accordance with the terms of this Agreement;
and (iii) upon delivery of the Affected Securities in accordance with the terms
of this Agreement, the purchaser shall acquire good and marketable title to the
Affected Securities, free and clear of all claims, liens, pledges and
encumbrances.
F. No Right to Transfer. If all Securities offered pursuant to
--------------------
Section 4A are not purchased, then all such Securities shall remain subject to
this Agreement and any holder thereof shall be bound by the terms and conditions
hereof.
G. Restrictions on the Corporation's Obligations. Each party hereto
---------------------------------------------
recognizes that no obligation on the part of the Corporation shall exist, and no
action or claim will be made to require, the repurchase, defeasance or other
acquisition of any Securities if not then expressly permitted by law and by the
Corporation's Senior Credit Facility, SBAF Debt and Articles of Incorporation.
5. PRICE.
-----
A. Agreement Price. The price of each share of Stock offered under
---------------
this Agreement shall be the "Agreement Stock Price" of such Stock on the date of
purchase. The price of each share of stock underlying the Warrants offered
under this Agreement less the exercise price of such shares underlying the
Warrants shall be the "Agreement Warrant Price" of such shares on the date of
purchase. The Agreement Stock Price and the Agreement Warrant Price are,
collectively, the "Agreement Price." The parties agree that the initial
Agreement Price is $20.70 per share. The total amount paid to the Selling
Shareholder or the Affected Shareholder, as the case may be, for the Securities
(number of shares underlying the Securities purchased multiplied by the
Agreement Price) shall be the "Purchase Price" for such Securities as defined in
Section 1O.
B. Voluntary Adjustments. At any time and from time to time, upon
---------------------
the approval of the holders of at least 75% of the Stock voting as one class and
not as separate classes, the parties may agree to adjust the Agreement Price or
to continue the Agreement Price at its previous amount; provided that such
agreement is evidenced by a certificate, in the form of Exhibit "C" to this
Agreement, which states the adjusted or continued Agreement Price; and provided
further that the parties shall not adjust the Agreement Price to a price below
$20.70 within the first two years of this Agreement.
C. Automatic Adjustments. If during any 12 consecutive calendar
---------------------
month period prior to an Offer or Triggering Event, a revised certificate of
Agreement Price has not been executed in accordance with Section 5B, the
Agreement Price shall be subject to adjustment as follows. The Corporation and
the Shareholders agree that the Agreement Price for each share underlying the
Securities of the Corporation shall be computed as of the end of the
Corporation's last fiscal month ending prior to the date of the Offer or
Triggering Event, as the case may be, to be the greater of (1) the Agreement
Price last determined pursuant to the Section 5A or 5B above, or (2) the price
determined by the following formula: the Corporation's EBITDA for the trailing
12-month period ending prior to the date of Offer or Triggering Event (i)
multiplied by the multiple set forth below
10
<PAGE>
opposite the applicable year in which the Offer or Triggering Event, as
applicable, occurred minus the principal amount of the Corporation's outstanding
debt and preferred stock plus accrued and unpaid interest and dividends and (ii)
divided by the number of shares of the Corporation's Stock (on a fully diluted
basis):
NUMBER OF YEARS FROM THE
DATE OF THIS AGREEMENT MULTIPLE
--------------------------- ----------------
2 or less 0
more than 2-less than 3 5
more than 3-less than 4 6
more than 4 7
D. Stock Splits, etc. Appropriate adjustments in the Agreement
------------------
Price for Securities shall be automatically made for any stock dividends, and
any split-up, combination of shares or recapitalization occurring after the
date of the determination of the Agreement Price.
6. PAYMENT TERMS.
-------------
A. Generally.
---------
(1) If the Purchase Price is less than $50,000, then the
Purchase Price shall be paid out in cash at Closing. If Purchase Price is
greater than $50,000, the Purchase Price shall be paid at the purchaser's option
(or at each purchaser's option if there is more than one purchaser) either (i)
in cash, (ii) in accordance with the Offer Terms or (iii) over a 5-year period,
in 20 equal quarterly installments (the "Installment(s)") (unless there is a
Section 4(A)(1), (2), (3) or (4) Triggering Event in which case the Purchase
Price shall be paid over a 1-year period, in 4 equal quarterly Installments,
subject to the last sentence in this Section 6A(1)), the first of which shall be
due 90 days from the Transfer Date or Delivery Date, as applicable, and the
remaining Installments thereafter on the same day of each succeeding quarter
until the Purchase Price shall have been paid in full, provided, however, that
if the Corporation is the purchaser the cash proceeds received by the
Corporation from any and all insurance policies on the life of a deceased
Shareholder, or a Shareholder with a Disability (a "Disabled Shareholder"), up
to the Purchase Price, shall be paid to the deceased Shareholder's personal
representative or to the Disabled Shareholder on the Delivery Date (or, if not
received by such Delivery Date, immediately upon receipt) and shall be applied
against the Purchase Price in reverse order of maturity, beginning with the last
Installment. Notwithstanding anything contained herein to the contrary, if there
is a Section 4A(5) or (6) Triggering Event within the first two years of this
Agreement, then the Affected Shareholder shall receive the Purchase Price over a
5-year period, at an interest rate of 6% per year, where 10% of the Purchase
Price is paid in each of years 1 and 2, 20% of the Purchase Price is paid in
each of years 3 and 4 and the balance of the Purchase Price is paid in year 5.
11
<PAGE>
(2) Notwithstanding anything contained in this Agreement to the
contrary, the Corporation shall purchase the Securities of a Selling Shareholder
or an Affected Shareholder only insofar as the Corporation may be permitted by
law and insofar as such purchase will not cause a default under any provision of
the Corporation's Senior Credit Facility, SBAF Debt or Articles of
Incorporation. To the extent the aggregate amount owed by the Corporation to all
Selling Shareholders and Affected Shareholders in any one year exceeds the
amounts permitted to be paid by the Corporation under the Corporation's Senior
Credit Facility, SBAF Debt or Articles of Incorporation, then the amount paid to
each Selling Shareholder or Affected Shareholder shall be reduced pro rata based
upon the aggregate principal amount owed by the Corporation to all Selling
Shareholders and Affected Shareholders, and the term of any promissory note
(which shall be in the form of Exhibit "D" attached hereto) issued by the
Corporation to any such Selling Shareholder or Affected Shareholder shall be
appropriately extended. Upon a Change of Ownership or Fundamental Change (as
defined in the Corporation's Articles of Incorporation), the Corporation shall
use its reasonable commercial efforts to prepay the entire unpaid amount
(including accrued interest) due under any promissory note issued by the
Corporation to a Selling Shareholder or Affected Shareholder.
B. Interest. Except as set forth in the last sentence of Section
--------
6A(1), unpaid balances of the Purchase Price shall bear interest at the Prime
Rate, as published in the Wall Street Journal from time to time. Interest
payments shall be made concurrently with each payment of principal.
C. Promissory Note. A non-negotiable subordinated promissory note
---------------
evidencing the unpaid portion of the Purchase Price, in the form attached hereto
as Exhibit "D" ("Note"), shall be executed by each purchaser and delivered to
the seller. No such note shall be delivered by the Corporation if not then
expressly permitted by law and by the Corporation's Senior Credit Facility, SBAF
Debt or Articles of Incorporation. Such note shall be subordinated to the
Senior Credit Facility and the SBAF Debt on the terms set forth in Exhibit "D".
D. Security. In order to secure the unpaid portion of the Purchase
--------
Price, each purchaser hereby agrees that it or he shall execute a Stock Pledge
Agreement, in the form attached hereto as Exhibit "E" ("Stock Pledge
Agreement").
7. INDEBTEDNESS OF SHAREHOLDER. Upon the purchase of Securities by the
---------------------------
Corporation, any indebtedness then owing by the Selling Shareholder or the
Affected Shareholder, as the case may be, to the Corporation shall be deducted
from the Installment(s) of the Purchase Price payable for the Securities
starting with the first Installment. If there is an inconsistency between the
terms of this Section 7 and the payment terms of a promissory note or notes
evidencing the indebtedness which is the subject of this Section 7, the terms of
such promissory note or notes shall control.
8. LEGAL PROHIBITION. If the Corporation desires to purchase the
-----------------
Securities of a Shareholder hereunder but there is a legal prohibition which
does not permit it to lawfully purchase such Securities, then the other
Shareholder(s) shall promptly take or cause or permit the Corporation
12
<PAGE>
to take such appropriate lawful actions, if any, as can be reasonably taken to
enable the Corporation to lawfully purchase and pay for such Securities.
Notwithstanding anything contained in this Section 8 to the contrary, a
Shareholder shall not be required to contribute money to the Corporation as a
loan or capital or cause money to be contributed to the Corporation as a loan or
capital in order to fulfill his obligations under the first sentence of this
Section 8.
9. BOARD OF DIRECTORS.
------------------
A. Each Shareholder shall vote all such Shareholder's Stock and any
other voting securities of the Corporation over which such Shareholder has
voting control and shall take all other reasonably necessary or desirable
actions within such Shareholder's control (whether in such Shareholder's
capacity as a shareholder, director, member of a board committee or officer of
the Corporation or otherwise including, without, limitation, attendance at
meetings in person or by proxy for purposes of obtaining a quorum and execution
of written consents in lieu of meetings), and the Corporation shall take all
reasonably necessary and desirable actions within its control (including,
without limitation, calling special board and shareholder meetings), so that:
(i) the authorized number of directors on the Board shall be
established and maintained at least 5 directors; provided, however the number of
directors may be reduced below 5 but not less than 3 with the consent of
Krasovec);
(ii) except as otherwise provided herein, the following
individuals shall be elected to the Board (A) a representative designated by
Krasovec (which may include himself), provided, however, that this right of
-------- -------
Krasovec shall be suspended at such time that Krasovec holds less than 3% of the
Stock (on a fully diluted basis); and (B) two representatives (the "Liberty
Directors") designated by Liberty as a Shareholder of Stock, provided, however,
-------- -------
that this right of Liberty shall be suspended at such time that Liberty holds
less than 10% of the Stock (on a fully diluted basis).
(iii) the removal from the Board (with or without cause) of
any representative designated hereunder by Liberty shall be only at the written
request of Liberty and under no other circumstances;
(iv) in the event that any representative designated hereunder
by Liberty ceases to serve as a director during his or her term of office, the
resulting vacancy on the Board shall be filled by a representative designated by
Liberty, as provided hereunder;
(v) in the event that the Board establishes any committees, at
least one member of each such committee shall be Krasovec (other than with
respect to an audit committee) and at least one member of each such committee
shall be a Liberty Director; provided, however, a Liberty Director may decline
such appointment from any such committee (other than with respect to an audit
committee) at any time; and
13
<PAGE>
(vi) in the event the Corporation elects to pay fees to its non-
employee directors for their services as directors, the Corporation shall pay
such fees to the Liberty Directors.
B. The Corporation shall pay the reasonable out-of-pocket expenses
incurred by each director in connection with attending the meetings of the Board
and any committee thereof. So long as Krasovec and the Liberty Directors serve
on the Board and for six years thereafter, the Corporation shall maintain
directors' and officers' indemnity insurance coverage reasonably satisfactory to
Liberty and Krasovec.
C. If Liberty or Krasovec fails to designate a representative to
fill a directorship pursuant to the terms of this Section or if the right to
designate a representative to fill a directorship has been reduced or
terminated, the election of an individual to such directorship shall be
accomplished in accordance with the Corporation's bylaws and applicable law.
10. ENDORSEMENT UPON SHARE CERTIFICATE. All Stock and warrant certificates
----------------------------------
shall be endorsed with a legend indicating transfer of the Corporation's shares
are restricted by this Shareholders' Agreement and the legend set forth in
Article 2.30-1.C. of the Texas Business Corporation Act. As practicable as
possible after the execution of this Agreement, each MBO Shareholder shall
deliver each and every of his Stock certificates to the Chief Financial Officer
of the Corporation for delivery to the Corporation's transfer agent of its
securities in order to have such certificates so legended. Each Shareholder
acknowledges and agrees that the Corporation reserves the right to direct the
transfer agent of its securities to place a stop order against the certificates
representing the Securities and to refuse to effect any transfers thereof in
violation of this Agreement (including any transfer in the absence of an
effective registration statement with respect to the Securities or in the
absence of an opinion of counsel to the Corporation that such transfer is exempt
from registration under the Securities Act of 1933, as amended, and under
applicable state blue sky laws).
11. REVIEW PRIOR TO TRANSFER. No Shareholder will Transfer any share of
------------------------
Securities or interest therein to any Person other than the Corporation without
satisfying the Corporation that the proposed Transfer complies with the
requirements of the Securities Act of 1933, as amended, and any other
applicable federal, state or local laws. Shareholders shall also submit to the
Corporation such opinions of counsel or other documents and agreements as it may
reasonably request.
12. TERMINATION. This Agreement shall terminate upon occurrence of any of
-----------
the following events: (1) the entry of any order for relief under the Federal
Bankruptcy Code with respect to the Corporation, or a receivership or
dissolution of the Corporation; or (2) an underwritten firm commitment public
offering by the Corporation of the Corporation's common stock, registered under
the Securities Act of 1933, as amended (an "IPO"); provided, however, that in
-------- -------
the event of an IPO, the rights of Liberty and Krasovec under Section 9 shall
survive the termination of this Agreement (except that in such event Ares shall
not be required to vote their shares in accordance with Section 9).
14
<PAGE>
13. NOTICES. Any notices required or permitted under this Agreement shall
-------
be given promptly, in writing, shall be hand delivered or mailed by a nationally
recognized overnight courier or by certified mail, return receipt requested,
postage prepaid, to the parties at their respective addresses set forth on
Exhibit "A" attached hereto (or such other addresses of which they give notice
to each other) and shall be deemed effective upon the earlier of hand delivery
or mailing.
14. TERMINATION OF PRIOR SHAREHOLDERS' AGREEMENTS. This Agreement
---------------------------------------------
expressly terminates any and all shareholders' agreements or similar agreements
that may have been executed by the Shareholders prior to the date hereof.
15. EXECUTION OF OTHER DOCUMENTS. The parties will execute and deliver
----------------------------
all documents and instruments which are reasonably necessary to carry out the
terms and conditions of this Agreement.
16. CONSENT OF SPOUSES. To the extent necessary to make this Agreement
------------------
enforceable under applicable state law by and against a Shareholder who is a
married individual, such Shareholder shall obtain the consent of his spouse to
the execution of this Agreement as evidenced by such spouse's signature on
Exhibit "F" attached hereto.
17. VOTING UNDER THIS AGREEMENT. In the event of any vote required
---------------------------
hereunder, the term "Stock" will be deemed to include shares issuable upon the
exercise of the Warrants held by Liberty to the extent the Warrants held by
Liberty are then exercisable.
18. MISCELLANEOUS.
-------------
A. This Agreement supersedes any prior written agreement or
understanding between the parties hereto with regard to the subject matter of
this Agreement.
B. This Agreement is the entire understanding and agreement of the
parties with regard to Securities and shall not be changed, amended or
terminated, except by written agreement of the holders of at least 75% of the
Stock; provided however that, unless agreed to by all of the Shareholders, the
Triggering Events under Sections 4(A)(1), (2), (3), (4) and (5) shall not be
amended to adversely affect any minority Shareholder; and provided further
however, that Sections 3H, 4G and 9 of this Agreement shall not be amended
without the prior written consent of Liberty; and provided further however, that
Section 3H of this Agreement shall not be amended without the prior written
consent of the Allen Group.
C. This Agreement shall inure to the benefit of and be legally
binding upon the parties hereto and their heirs, personal representatives,
successors and permitted assigns.
D. This Agreement shall be construed and enforced in accordance with
the laws of the State of Texas.
15
<PAGE>
E. Where appropriate herein, the reference to the masculine gender
shall include the feminine and neuter, the singular shall include the plural and
the plural the singular, in each case as the context may require.
F. If any provision of this Agreement is illegal, invalid or against
public policy, the remainder of this Agreement shall not be affected thereby.
G. Any headings preceding the text of the several paragraphs hereof
are inserted solely for convenience of reference and shall not constitute a part
of this Agreement, nor shall they affect its meaning, construction or effect.
H. This Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be an original hereof, and it
shall not be necessary in making proof of this Agreement to produce or account
for more than one counterpart hereof. In the event that this Agreement is not
executed by all of the parties hereto, it nevertheless shall be binding on such
parties as shall have executed it.
* * * * *
16
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound, the parties hereto
have executed this Agreement on this 30th day of October, 1998.
Norwood Promotional Products, Inc. NORWOOD PROMOTIONAL PRODUCTS, INC.
106 E. Sixth Street, Suite 300
Austin, Texas 78701
By: -------------------------------------
Name: Frank P. Krasovec
Title: President
Attest: ---------------------------------
Name: James P. Gunning, Jr.
Title: Secretary
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998 BY AND
AMONG
NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
17
<PAGE>
Witness:
---------------------- ----------------------------------
FRANK P. KRASOVEC
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
18
<PAGE>
Witness:
---------------------- ----------------------------------
JOHN H. JOSEPHSON
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
19
<PAGE>
Witness:
---------------------- ----------------------------------
JAMES P. GUNNING, JR.
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
20
<PAGE>
Witness:
---------------------- ----------------------------------
J. MAX WAITS
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
21
<PAGE>
Witness:
---------------------- ----------------------------------
JOHN FINNELL
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
22
<PAGE>
Witness:
---------------------- ----------------------------------
JAMES PRESTON
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
23
<PAGE>
Witness:
---------------------- ----------------------------------
PAUL W. LARSON
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
24
<PAGE>
Witness:
---------------------- ----------------------------------
RUSSELL A. DEVEREAU
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED ___________, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
25
<PAGE>
Witness:
---------------------- ----------------------------------
GEORGE BELL STROB
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
26
<PAGE>
Witness:
---------------------- ----------------------------------
BRIAN P. MILLER
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
27
<PAGE>
Witness:
---------------------- ----------------------------------
DAVID KAGEL
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED ____________, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
28
<PAGE>
Witness:
---------------------- ----------------------------------
ROBIN FENNELL
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED ____________, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
29
<PAGE>
Witness: ALLEN & COMPANY INCORPORATED
------------------------
By:
_______________________________________
Name:
Title:
Witness:
------------------------ ------------------------------------------
STANLEY S. SHUMAN
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
30
<PAGE>
Witness: CIRRUS, LLC
_____________________
By:
_________________________________
Name:
Title:
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
31
<PAGE>
Witness: LIBERTY PARTNERS HOLDINGS 17, L.L.C.
------------------------
By: Liberty Partners, L.P., its manager
By: Liberty Capital Partners, Inc., its
general partner
By:
____________________________
Name:
Title:
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
32
<PAGE>
Witness:
------------------------ ------------------------------------------
MICHAEL LINDERMAN
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
33
<PAGE>
Witness: ARES LEVERAGED INVESTMENT FUND, L.P.
----------------------
By: Ares Management, L.P., its general
partner
By:
____________________________
Name:
Title:
Witness: ARES LEVERAGED INVESTMENT FUND II, L.P.
----------------------
By: Ares Management II, L.P., its general
partner
By:____________________________
Name:
Title:
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
34
<PAGE>
Witness: By:
_______________________ ____________________________________________
Name:
Title:
Witness:
_______________________ ____________________________________________
Ron Byrne, cust. for Shawne Byrne, under the
Co. Unif. Min. Act
Witness:
_______________________ ____________________________________________
Ron Byrne, cust. for Nicole Byrne, under the
Co. Unif. Min. Act
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
35
<PAGE>
Witness:
_______________________ ZEKE INVESTMENT PARTNERS
By: _______________________________________
Name: Edward Antoian
Title: General Partner
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
36
<PAGE>
Witness:
_______________________ ________________________________
ROBERT TODD
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
37
<PAGE>
Witness:
_______________________ ________________________________
JERRY LINDAUER
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
38
<PAGE>
KUDROW LIMITED
Witness: By:
-------------------------- ------------------------------------
Name:
Title:
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
39
<PAGE>
HUGHES FAMILY PARTNERSHIP, L.P.
Witness: By:
__________________________ ________________________________
Name:
Title:
Witness:
_______________________ ________________________________
ROBERT W. HUGHES
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
40
<PAGE>
Witness:
_______________________ _______________________________________
STEWART EMERY
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
41
<PAGE>
Witness:
_______________________ _______________________________________
TONY FREEDLEY
SIGNATURE PAGE TO THE SHAREHOLDERS' AGREEMENT DATED OCTOBER __, 1998
BY AND AMONG NORWOOD PROMOTIONAL PRODUCTS, INC. AND ITS SHAREHOLDERS.
42
<PAGE>
EXHIBIT "A"
-----------
STOCK OWNERSHIP
---------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES
SHAREHOLDER OF STOCK ADDRESS
- --------------------------------------------------------- --------------------------------------
<S> <C> <C>
Frank P. Krasovec /(2)/....................... 674,371 #3 Niles Road
Austin, TX 78703
John H. Josephson /(1)/....................... 0 c/o Allen & Company Incorporated
711 Fifth Avenue
New York, NY 10022
James P. Gunning, Jr. /(2)/................... 2,916 3817 Gaines Court
Austin, TX 78735
J. Max Waits /(1)/............................ 3,000 2149 N.W. 135/th/ Street
Clive, IA 50325
John Finnell /(1)/............................ 137,457 c/o Norwood Promotional Products, Inc.
106 East Sixth, Suite 300
Austin, TX 78701
James Preston /(2)/........................... 5,000 38 Fair Oaks
St. Louis, MO 63124
Paul W. Larson /(1)/.......................... 38,431 2135 Encino Loop
San Antonio, TX 78259
Russell A. Devereau........................... 500 472 High Street
Walpole, MA 02081
George Bell Strob /(1)/....................... 34,185 19923 Encino Grove
San Antonio, TX 78259
Brian P. Miller /(1)/......................... 10,142 3533 Ridgewood Drive
Pittsburgh, PA 15235
Robin Fennell /(2)/........................... 1,000 1800 Brittania Court
Chesterfield, MO 63017
David Kagel /(1)/............................. 958 4005 Batry Court
Caldren, CA 91302
Michael Linderman /(5)/....................... 5,882 c/o Ha lo
5980 Touby Ave.
Niles, IL 60714
Liberty Partners Holdings 17, L.L.C./(3)/..... 1,135,368 1177 Avenue of the Americas
34/th/ Floor
New York, NY 10036-2714
Attention: Paul J. Huston
Ares Leveraged Investment Fund, L.P/(2)/...... 16,908 Ares Investment Fund L.P.
1999 Avenue of the Stars
Suite 1900
Los Angeles, CA 90067
Ares Leveraged Investment Fund II, L.P/(2)/... 16,908 Ares Investment Fund II L.P.
1999 Avenue of the Stars
Suite 1900
Los Angeles, CA 90067
Allen & Company Incorporated /(4)/............ 90,000 711 Fifth Avenue
New York, NY 10022
Stanley S. Shuman /(4)/....................... 60,000 c/o Allen & Company Incorporated
711 Fifth Avenue
New York, NY 10022
Cirrus, LLC /(2)/............................. 169,082 c/o Heron Investments, LLC
301 Tresser Blvd., 13/th/ Floor
Stamford, CT 06901
Attention: Tim Tully
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
SHAREHOLDER OF STOCK ADDRESS
- --------------------------------------------------------- --------------------------------------
<S> <C> <C>
Zeke Investment Partners /(2)/................ 6,039 c/o Edward Antoian
Chartwell Investment Partners
1235 W. Lakes Drive, Suite 330
Berwyn, PA 19312-2412
Ron Byrne & Associates Profit c/o Ron Byrne & Associates
Sharing /(2)/................................. 2,899 285 Bridge Street
Vail, CO 81657
Ron Byrne, Cust. for Shawne Byrne, under the c/o Ron Byrne & Associates
CO. Unif. Gift Min. 285 Bridge Street
Act /(2)/..................................... 83 Vail, CO 81657
Ron Byrne, Cust. for Nicole Byrne, under the c/o Ron Byrne & Associates
CO. Unif. Gift Min. 285 Bridge Street
Act /(2)/..................................... 83 Vail, CO 81657
Robert Todd /(2)/............................. 3,865 106 Hawthorne Road
Pittsburgh, PA 15238
Jerry Lindauer /(2)/.......................... 3,865 c/o Prime Cable
One American Center
600 Congress Ave, Suite 3000
Austin, TX 78701
Kudrow Limited /(2)/.......................... 4,831 c/o Charles F. Newman, Esquire
E. Edwards, Son & Nioce
9/13 York Road
Ilford Essex
1G1 3AD
United Kingdom
Robert W. Hughes /(2)/........................ 3,865 c/o Prime Cable
One American Center
600 Congress Ave, Suite 3000
Austin, TX 78701
Hughes Family Partnership, L.P. /(2)/......... 3,865 c/o Prime Cable
One American Center
600 Congress Ave, Suite 3000
Austin, TX 78701
Stewart Emery /(2)/........................... 3,623 98 Main Street, Suite 627
Tiburon, CA 94920
Tony Freedley /(2)/........................... 1,208 101 Brideway Suite 120
Sausalito, CA 95965
</TABLE>
- -----------------------------------------
(1) Does not include shares to be sold as soon as practicable after the date
hereof, provided as on Appendix "1" to this Exhibit "A".
(2) Includes shares to be acquired as soon as practicable after the date
hereof, as provided on Appendix "1" to this Exhibit "A".
(3) Includes warrants to purchase 990,440 shares of Stock owned of record by
Liberty.
(4) Includes a warrant to purchase 150,000 shares of Stock owned of record by
Allen & Company Incorporated. Allen & Company Incorporated is the
beneficial holder of the warrant with respect to 90,000 shares of Stock
issuable upon exercise thereof and Stanley S. Shuman is the beneficial
holder of the warrant with respect to 60,000 shares of Stock issuable upon
exercise thereof.
(5) Includes shares of Stock issuable upon conversion of a convertible
promissory note held by Michael Linderman.
44
<PAGE>
APPENDIX "1" TO EXHIBIT "A"
---------------------------
PERMITTED SALES AND PURCHASES
AS SOON AS PRACTICABLE AFTER CLOSING
------------------------------------
<TABLE>
<CAPTION>
SALES BY SHAREHOLDERS
- ---------------------------------------------
NUMBER OF DOLLAR VALUE OF
SHARES OF SALE AT $20.70
SHAREHOLDER COMMON STOCK PER SHARE
---------------------------------------------------------- ---------------
<S> <C> <C> <C>
John Finnell............................ 60,000 $1,242,000.00
Paul W. Larson.......................... 20,000 $ 414,000.00
Brian P. Miller......................... 7,000 $ 144,900.00
David Kagel............................. 6,500 $ 134,550.00
J. Max Waits............................ 3,738 $ 77,376.60
George Bell Strob....................... 3,000 $ 62,100.00
John H. Josephson....................... 2,000 $ 41,400.00
---------------- ---------------
102,238 $2,116,326.60
PURCHASES BY SHAREHOLDERS
- -------------------------
NUMBER OF DOLLAR VALUE OF
SHARES OF SALE AT $20.70
SHAREHOLDER COMMON STOCK PER SHARE
---------------------------------------------------------- ---------------
Frank P. Krasovec....................... 20,454 $ 400,006.80
James P. Gunning, Jr.................... 2,416 $ 50,011.20
James Preston........................... 4,000 $ 82,800.00
Robin Fennell........................... 1,000 $ 20,700.00
Zeke Investment Partners................ 6,039 $ 125,007.30
Ron Byrne & Associates Profit Sharing... 2,899 $ 60,009.30
Ron Byrne, Cust. for Shawn Byrne, Under 83 $ 1,718.10
the CO Unif. Gift Min. Act..............
Ron Byrne, Cust. for Nicole Byrne, 83 $ 1,718.10
Under
the CO Unif. Gift Min. Act..............
Robert Todd............................. 3,865 $ 80,005.50
Jerry Lindauer.......................... 3,865 $ 80,005.50
Kudrow Limited.......................... 4,831 $ 100,001.70
Robert W. Hughes........................ 3,865 $ 80,005.50
Hughes Family Partnership, L.P.......... 3,865 $ 80,005.50
Stewart Emery........................... 3,623 $ 74,996.10
Tony Freedley........................... 1,208 $ 25,005.60
Ares Leveraged Investment Fund, L.P..... 16,908 $ 349,995.60
Ares Leveraged Investment Fund II, L.P.. 16,908 $ 349,995.60
Cirrus, LLC............................. 6,326 $ 154,339.20
---------------- ---------------
102,238 $2,116,326.60
</TABLE>
45
<PAGE>
EXHIBIT "B"
-----------
AMENDMENT
---------
Intending to be legally bound, the undersigned agrees to become a party to
the Shareholders' Agreement of Norwood Promotional Products, Inc., dated as of
____________, 1998 ("Shareholders' Agreement") and to be bound by such
Shareholders' Agreement as a Shareholder (as defined therein).
Dated:
- ------------------------- --------------------------------------------------
Address Print name:
Accepted:
NORWOOD PROMOTIONAL PRODUCTS, INC.
By:
-----------------------------------------------
Name:
Title:
46
<PAGE>
EXHIBIT "C"
-----------
CERTIFICATE OF AGREEMENT PRICE
------------------------------
The undersigned, NORWOOD PROMOTIONAL PRODUCTS, INC. (the "Corporation"), a
Texas corporation, and the Shareholders of the Corporation, pursuant to Section
5B of the Shareholders' Agreement dated __________, 1998, agree that on the date
hereof the Agreement Price of each share underlying the Securities of the
Corporation is $_____________.
WITNESS the due execution and delivery hereof this _____ day of
_______________, ____.
NORWOOD PROMOTIONAL PRODUCTS, INC.
By:
-----------------------------------------------
Name:
Title:
-------------------------------------------------
Name of Shareholder:
-------------------------------------------------
Name of Shareholder:
-------------------------------------------------
Name of Shareholder:
-------------------------------------------------
Name of Shareholder:
47
<PAGE>
EXHIBIT "D"
-----------
Date:
FORM OF NON-NEGOTIABLE PROMISSORY NOTE
--------------------------------------
For value received, intending to be legally bound, the undersigned
("Maker") promises to pay to _______________________ ("Payee") the principal
amount of $__________ ("Principal Amount") on the following terms and
conditions:
1. Subject to the terms of Section 6A of the Shareholders' Agreement
dated ___________, 1998, by and among Norwood Promotional Products, Inc. (the
"Corporation") and its Shareholders as listed on Exhibit "A" thereto (the
"Shareholders' Agreement"), the Principal Amount shall be paid over a [5-year]
[1-year] period, in [20][4] equal consecutive quarterly installments of $_______
each ("Payment"), the first such Payment to be due on __________________, and
the remaining Payments to be due on the same day of each and every three months
thereafter; provided however, if the Corporation is the Maker hereunder and if
Payments are not permitted under the Senior Credit Facility or the SBAF Debt, as
applicable, such Payments will not be paid or shall cease to be paid until the
Final Maturity Date (as defined in the Senior Credit Facility) of the Senior
Credit Facility or until so permitted under the SBAF Debt, as applicable.
2. Interest shall be paid on the unpaid balance of the Principal Amount
at the Prime Rate, as published in the Wall Street Journal from time to time.
Such interest is to be paid concurrently with each installment of principal.
3. Maker may at any time or from time to time, without premium or
penalty, pay the entire unpaid Principal Amount or any part thereof, together
with the accrued and unpaid interest on the amount prepaid.
4. [Insert this Clause if the Maker is the Corporation.] Anything in this
Note to the contrary notwithstanding, the indebtedness evidenced by this Note
shall be subordinate and junior in the right of payment, to the extent and in
the manner hereinafter set forth, to all Obligations of Maker under the Senior
Credit Facility and the SBAF Debt (such Obligations and other indebtedness and
obligations in connection with any renewal, refunding, restructuring or
refinancing thereof, including interest thereon accruing after the commencement
of any proceedings referred to in clause (i) below, whether or not such interest
is an allowed claim in such proceeding, being hereinafter collectively referred
to as "Senior Indebtedness"):
(i) In the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to Maker or to its creditors, as such, or to its
property, and in the event of any proceedings for voluntary liquidation,
dissolution or other winding up to Maker, whether or not involving insolvency or
bankruptcy, then (x) the holders of Senior Indebtedness shall be paid in full in
cash in respect of all amounts constituting Senior Indebtedness before Payee is
entitled to receive (whether directly or indirectly), or make any demands for,
any payment on account of this Note and (y) until the holders of Senior
Indebtedness are paid in full in cash in respect of all amounts constituting
Senior Indebtedness, any payment or distribution to which the Payee would
otherwise
48
<PAGE>
by entitled (other than debt securities of Maker that are subordinated to at
least the same extent as this Note, to the payment of all Senior Indebtedness
then outstanding (such securities being hereinafter referred to as "Restructured
Debt Securities")) shall be made to the holders of Senior Indebtedness.
(ii) If any payment of distribution of any character, whether in cash,
securities or other property (other than Restructured Debt Securities), in
respect of this Note shall (despite these subordination provisions) be received
by Payee in violation of clause (i) before all Senior Indebtedness shall have
been paid in full in cash, such payment or distribution shall be held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness (or their representatives), ratably according to the
respective aggregate amounts remaining unpaid thereon, to the extent necessary
to pay all Senior Indebtedness in full in cash.
To the fullest extent permitted by law, no present or future holder of
Senior Indebtedness shall be prejudiced in its right to enforce the
subordination of this Note by any act or failure to act on the part of Maker or
by any act or failure to act on the part of such holder or any trustee or agent
for such holder. Payee and Maker hereby agree that the subordination of this
Note is for the benefit of the holders of Senior Indebtedness, such holders are
obligees under this Note to the same extent as if their names were written
herein as such and the Agent may, on behalf of such holders proceed to enforce
the subordination provisions herein.
Nothing contained in the subordination provisions set forth above is
intended to or will impair, as between the Maker and Payee, the obligations of
the Maker, which are absolute and unconditional, to pay to the Payee the
principal of and interest on this Note as and when due and payable in accordance
with its terms, or is intended to or will affect the relative rights of the
Payee and other creditors of the Maker other than the holders of Senior
Indebtedness.
5. This Note is governed by and subject to all conditions and provisions
of the Shareholders' Agreement.
6. Maker hereby grants to Payee a security interest in __________ shares
of the common stock of the Corporation (the stock purchased by Maker from
Payee), represented by Certificate Nos. ______. Maker agrees to do all things
to enable Payee to perfect such security interest pursuant to the provisions of
the Uniform Commercial Code as then in force in Texas and agrees to execute a
Stock Pledge Agreement, in the form attached to the Shareholders' Agreement (the
"Stock Pledge Agreement").
7. The occurrence of any one or more of the following events shall
constitute an event of default hereunder ("Event of Default"):
(a) The non-payment of any amount payable hereunder within 30 days of
the due date;
(b) The insolvency, in the bankruptcy sense, of Maker;
49
<PAGE>
(c) The making of an assignment for the benefit of creditors or the
proposing of a composition agreement with creditors by Maker;
(d) Commencement of any proceeding in bankruptcy, reorganization,
arrangement, liquidation, dissolution, debtor rehabilitation, creditor
adjustment, or insolvency, local, state or federal, by or against Maker; or the
appointment of a trustee, receiver, executor, conservator, liquidator, or other
judicial representative, similar or dissimilar, for Maker or any of Maker's
property, provided that such proceeding is not dismissed within 30 days after
commencement;
(e) The taking of any action by Maker in connection with the
dissolution, liquidation, or termination of existence of Maker; or
(f) The attachment or seizure of or levy upon any material portion of
the property of Maker.
Upon the occurrence of an Event of Default, the entire unpaid principal balance
together with accrued and unpaid interest therein shall be immediately due and
payable.
8. Failure of the Payee to exercise any right granted hereunder shall not
constitute a waiver of the right to the later exercise thereof. Demands,
presentment for payment, protest, notice of dishonor or nonpayment and notice of
the exercise of any option hereunder, are hereby waived by Maker.
9. This Note shall not be negotiable.
10. This Note shall be governed by and construed in accordance with the
laws of the State of Texas, shall inure to the benefit of Payee and Payee's
heirs, personal representatives and assigns and shall be binding upon Maker and
Maker's heirs, personal representatives, successors and assigns.
11. All terms used herein, and not otherwise defined herein, shall have
their respective meanings contained in the Shareholders' Agreement.
----------------------------------------
, Maker
50
<PAGE>
EXHIBIT "E"
-----------
FORM OF
STOCK PLEDGE AGREEMENT
----------------------
THIS STOCK PLEDGE AGREEMENT, dated ____________, 19__, by and among
_____________________ ("Pledgor"), __________________ ("Secured Party") and
_____________________ ("Pledgeholder").
BACKGROUND
----------
Pledgor has purchased or redeemed from Secured Party ____ shares of Norwood
Promotional Products, Inc. ("Corporation") common stock (hereinafter called,
"Shares") pursuant to the terms of that certain Shareholders' Agreement dated
October __, 1998, by and among the Corporation and its Shareholders listed on
Exhibit "A" thereto (the "Shareholders' Agreement"). Pledgor has executed a
Non-Negotiable Promissory Note (the "Note") evidencing Pledgor's obligation for
payment of the balance of the purchase price for the Shares. In order to secure
the Note of Pledgor to Secured Party, and the performance of Pledgor's
obligations under the Shareholders' Agreement, Pledgor is willing to enter into
this Pledge Agreement covering the Shares purchased or redeemed by Pledgor.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. OBLIGATIONS. Pledgor is entering into this Agreement in order to
-----------
secure Pledgor's obligations to Secured Party under the Note, the Shareholders'
Agreement, and this Agreement (all of the foregoing are hereinafter collectively
called the "Obligations").
2. SECURITY INTEREST AND PLEDGE OF STOCK. As security for the payment
-------------------------------------
and performance of the Obligations, Pledgor hereby pledges and grants a security
interest to Secured Party in all of the Shares together with any dividend, cash,
other stock or property received in exchange or in substitution for the Shares,
other distributions which may be made on, or distributed in consequence of the
ownership of, the Shares, and any securities issued or received in distribution
upon or conversion of or in respect of or in exchange for the Shares, including
but not limited to those arising from a stock dividend, split, reclassification,
reorganization, merger, consolidation or sale of assets, and any subscriptions,
warrants, or other rights or options issued by Pledgor (all of the foregoing
hereinafter collectively included in the Shares).
3. OBLIGATIONS OF PLEDGOR.
----------------------
(a) General Obligation to Pay. If Pledgor is required to make any
-------------------------
payments under the Obligations, Pledgor shall pay to Secured Party the amounts
due under the Obligations and,
51
<PAGE>
following default, shall pay all reasonable expenses and reimburse Secured Party
for all expenditures, including attorneys' fees and court costs, in connection
with the exercise by Secured Party of any of its rights and remedies under this
Agreement, without regard to whether suit must be filed, and in taking
possession of, disposing of, or preserving the Shares, and shall pay, as part of
the debt hereby secured, any amounts actually paid by Secured Party to procure
the discharge or release of any liens on the Shares which may arise by reason of
taxes or levies assessed against Pledgor.
(b) Additional Obligations of Pledgor.
---------------------------------
(i) Upon execution of this Agreement and in fulfillment of the
security interest and pledge set forth in Paragraph 2 above, Pledgor shall
deliver to Pledgeholder in accordance with Paragraph 7 below, the stock
certificate(s) representing the Shares accompanied by an Assignment Separate
from Certificate relating thereto, duly endorsed in blank for transfer.
Pledgeholder shall then hold all the Shares and assignments subject to this
Agreement. Pledgeholder shall likewise hold any other aspects of the Shares as
defined in Paragraph 2 above until the time of default hereunder or full payment
of the Obligations.
(ii) Pledgor shall not, and shall not attempt to, cancel, retire,
transfer, sell, encumber, or otherwise dispose of any of the Shares and shall
not create, assume, or suffer any security interest, lien, charge, or other
encumbrance in favor of any individual or entity (other than Secured Party) in,
on, or to any of the Shares.
4. EVENTS OF DEFAULT. "Default" shall mean a default or event of default
-----------------
as set forth in the Note and/or in the Shareholders' Agreement.
5. REMEDIES UPON DEFAULT.
---------------------
(a) Following a Default, in addition to any and all remedies set
forth in the Obligations, Secured Party shall, unless otherwise provided in the
Obligations, give written notice to Pledgeholder and Pledgor ("Default Notice")
stating that a Default has occurred, and Pledgeholder shall, unless he is in
receipt of a written notice from Pledgor ("Pledgor Notice"), within five days of
delivery of the Default Notice, stating that there has not been a Default as
asserted by Secured Party, deliver the Shares to the Secured Party on the sixth
day after delivery of the Default Notice by the Secured Party and Secured Party
may do any of the following:
(i) Exercise any and all rights and remedies afforded to a
secured party by the Texas Uniform Commercial Code, as amended, or otherwise
available to Secured Party, at law or in equity with respect to the Shares;
(ii) Transfer the whole or any part of the Shares into his name
or his nominee, vote the Shares, and notify the Pledgor to make payment to
Secured Party of any dividends or other amounts due or to become due on the
Shares;
52
<PAGE>
(iii) Sell the Shares, at Secured Party's election, at either
public or private sale(s) or other proceedings. Proceeds of the sale of the
Shares shall first be applied to all sums due in connection with the Obligations
and the reasonable fees and expenses in connection therewith, including any
expenses incurred by Secured Party in the custody, preservation or preparation
for sale, and any balance shall be paid to Pledgor. To the extent Secured Party
is required by law to give Pledgor prior notice of any public or private sale,
or other disposition of the Shares, Pledgor agrees that ten (10) days prior
written notice shall be a reasonable and sufficient notice of such sale or other
intended disposition.
(b) Immediately following Default and the giving of notice required
at the beginning of this Paragraph 5, Secured Party shall exercise all rights of
the owner of the Shares, such rights to continue until the Shares have been
disposed of to third parties pursuant to this Agreement, but such rights to
continue without interruption if Secured Party acquires the Shares pursuant to
this Agreement.
6. TERMINATION. Upon payment in full of all of the Obligations, the
-----------
security interest herein granted shall terminate and Pledgeholder shall deliver
to Pledgor the Shares to the extent such Shares have not theretofore been sold
or otherwise applied pursuant to this Agreement. No Shares shall be released
from this Agreement until Pledgor has made full payment under all Obligations
relating to all of the Shares.
7. PLEDGEHOLDER PROVISIONS.
-----------------------
(a) Items to be Held by Pledgeholder. The Pledgeholder shall hold
--------------------------------
all of the Shares and assignments in accordance with the terms of this Agreement
for:
(i) Delivery to Pledgor upon payment in full of the Obligations,
such delivery to be made only upon Secured Party giving written notice to
Pledgeholder and Pledgor that all Obligations have been met and the Shares may
be delivered to Pledgor; or
(ii) Delivery to Secured Party in the event of Default but not
until six (6) days after delivery of the Default Notice if Pledgeholder has not
received the Pledgor Notice within the time period set forth in Section 5(a). If
the Pledgeholder has received the Pledgor Notice within the prescribed time
limits, the Pledgeholder shall continue to hold the Shares until there is a
final, non-appealable court determination on the issue of whether Default
occurred or until the parties reach an out-of-court written settlement and
Pledgeholder is in receipt of a copy of the same.
(b) Liability of Pledgeholder.
-------------------------
(i) In any action taken relative to this Agreement, the
Pledgeholder shall not be liable for any mistake of fact or error of judgment,
or for any omissions of any kind, unless caused by his own willful misconduct.
53
<PAGE>
(ii) Pledgeholder may act in reliance upon written advice of
counsel satisfactory to him in reference to any matter connected with the pledge
hereunder and shall not incur any liability for any action taken as a result of
such advice.
(iii) The parties hereto agree to indemnify, defend and hold
harmless the Pledgeholder from all damages, costs and expenses, including
counsel fees, incurred by the Pledgeholder, except such as result from his own
willful misconduct.
(c) Pledgeholder.
------------
(i) The Pledgeholder hereunder shall be ________________. In
the event of death, resignation, or inability to serve as Pledgeholder, the
Corporation shall designate such other person or persons to serve as
Pledgeholder(s) in his place.
(ii) In the event that a dispute concerning the subject matter of
this Agreement is such that Pledgeholder deems it necessary for his protection
to do so, the Pledgeholder shall deposit all or part of the Shares, assignments,
and any other property held by him pursuant to this Agreement, into court, and
upon such deposit into court, the Pledgeholder shall have no further duties with
respect to such property.
8. GENERAL.
-------
(a) Additional Assurances. Pledgor shall execute and file all
---------------------
documents, make or cause to be made appropriate entries in the stock transfer
books of the Corporation, and do any and all things which are reasonably
requested by Secured Party to perfect, continue perfected, or otherwise evidence
Secured Party's security interest in the Shares or reflect the interest of any
party who may become the owner of the Shares.
(b) Notices. All notices required or permitted under this Agreement
-------
shall be in writing and shall be deemed to have been given, made and received
when hand delivered against receipt, or when placed in the United States mail,
certified or registered mail, return receipt requested, postage prepaid,
addressed to the parties at the addresses set forth on the signature page hereof
or to such other addresses as the parties may give notice to each other in
conformity with provisions of this paragraph as to the giving of notice.
(c) Miscellaneous.
-------------
(i) This Agreement contains the entire understanding of the
parties with respect to the subject matter of this Agreement, superseding any
prior or contemporaneous communications of any kind, written or oral.
(ii) This Agreement may not be changed orally but only by
agreement signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
54
<PAGE>
(iii) This Agreement shall be governed and construed in
accordance with the substantive laws of the State of Texas, with respect to
contracts executed in and to be performed in such State. The parties hereto
irrevocably consent to the exclusive jurisdiction of the Travis County Court in
Austin, Texas or the United States District Court for the Western District of
Texas/Austin Division in any and all actions and proceedings whether arising
hereunder or under any other agreement or undertaking and irrevocably agree to
service of process by certified mail, return receipt requested to the addresses
of the parties as set forth herein.
(iv) This Agreement shall inure to the benefit of, and be binding
upon the respective parties hereto and their heirs, executors, administrators,
successors, and assigns.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals the
day and year first above written.
SECURED PARTY:
- --------------------------------- ------------------------------------------
Address
PLEDGOR:
- --------------------------------- ------------------------------------------
Address
Intending to be legally bound hereby, the undersigned agrees to be bound as
Pledgeholder by the provisions of the above Pledge Agreement dated
_______________, ____, between Pledgor and Secured Party to the extent that such
provisions apply to Pledgeholder.
------------------------------------------
Pledgeholder
55
<PAGE>
EXHIBIT "F"
-----------
CONSENT OF SPOUSES
------------------
We, being the spouses of the Shareholders of Norwood Promotional Products,
Inc., each hereby acknowledge and agree as follows:
1. I have read the written Shareholders' Agreement dated ___________,
1998, between and among Norwood Promotional Products, Inc., a Texas corporation,
and its Shareholders listed on Exhibit "A" thereto.
2. I am familiar with and understand the transactions contemplated by the
said Shareholders' Agreement and hereby join therein to the extent, if any, that
my joinder may be necessary.
3. I hereby consent to the execution of the said Shareholders' Agreement
by my spouse and to any sale or purchase of shares, or other actions, including,
without limitation, any future amendments or modifications undertaken pursuant
to the Shareholders Agreement.
4. I hereby waive and relinquish unto any purchaser of any of my spouse's
shares of Norwood Promotional Products, Inc., under the Shareholders' Agreement
any and all rights of any nature whatsoever which I may now or hereafter have in
such shares except any rights which I may have to receive or share in the
proceeds of such sale.
IN WITNESS WHEREOF, the undersigned have signed and sealed this Consent on
__________, 1998, intending to be legally bound hereby.
--------------------------------------------------
Name:
Spouse of James P. Gunning, Jr.
--------------------------------------------------
Name:
Spouse of J. Max Waits
--------------------------------------------------
Name:
Spouse of John Finnell
56
<PAGE>
--------------------------------------------------
Name:
Spouse of James Preston
--------------------------------------------------
Name:
Spouse of Paul W. Larson
--------------------------------------------------
Name:
Spouse of Russell A. Devereau
--------------------------------------------------
Name:
Spouse of George Bell Strob
--------------------------------------------------
Name:
Spouse of Brian P. Miller
--------------------------------------------------
Name:
Spouse of David Kagel
--------------------------------------------------
Name:
Spouse of Robin Fennell
--------------------------------------------------
Name:
Spouse of Stanley S. Shuman
--------------------------------------------------
Name:
Spouse of Robert Todd
--------------------------------------------------
Name:
Spouse of Jerry Lindauer
--------------------------------------------------
Name:
Spouse of Michael Linderman
57
<PAGE>
--------------------------------------------------
Name:
Spouse of Robert W. Hughes
--------------------------------------------------
Name:
Spouse of Stewart Emery
--------------------------------------------------
Name:
Spouse of Tony Freedley
58
